GBP/AUD, EUR/AUD Forecast: Risk Aversion Fuels Breakout Potential

AUD under pressure as risk sentiment weakens ahead of April 2
GBP/AUD tests 2.0627 resistance, EUR/AUD eyes breakout extension
Momentum signals mixed, reinforcing need for decisive price confirmation

Summary

As a known proxy for risk appetite and global economic growth, the Australian dollar was always more likely to move sharply than European currencies in response to headlines on U.S. tariff policy. With concerns rising ahead of the so-called ‘Liberation Day’ on April 2, it’s no surprise that GBP/AUD and EUR/AUD have either broken out or are eyeing bullish breakouts early in the trading week.

GBP/AUD Eyes Bullish Breakout

Source: TradingView

Thursday’s bullish engulfing candle and rising risk aversion have GBP/AUD knocking on the door of a bullish breakout, with the pair testing resistance at 2.0627 in early Asian trade on Monday.

Stepping back, GBP/AUD remains within an ascending triangle pattern, bouncing off uptrend support on four separate occasions this month. While convention suggests traders should watch for a topside break, momentum indicators are less convincing—RSI (14) has been diverging from price in recent weeks, while MACD is easing lower despite staying in positive territory.

The conflicting price and momentum signals reinforce the need for a decisive break above 2.0627 before considering bullish setups. A confirmed break and close above the level could open the door for longs targeting 2.0859, the swing high from March 2020, with a stop beneath to protect against reversal.

A failure at 2.0627 could see the setup flipped, with shorts established beneath the level and a stop above for protection. The initial downside target would be uptrend support, currently around 2.0425.

EUR/AUD Break Puts March High on Radar

Source: TradingView

Friday brought a textbook bullish break of the falling wedge EUR/AUD had been sitting in for most of March, with the price pushing back towards the March 21 high of 1.7272. That now looms as the next battleground for bulls and bears, with a clean break above opening the path for a run towards the March 11 high of 1.7420.

If such a move occurs, traders could look to establish longs above 1.7272 with a stop beneath for protection. But if EUR/AUD fails to extend its bullish move, the setup could be flipped, allowing for shorts to be established beneath the level with a stop above. 1.7166, which acted as both support and resistance earlier this month, screens as an initial target. Beyond that, former wedge support provides another option for those seeking greater risk-reward.

While RSI (14) and MACD are trending lower, both remain firmly in positive territory, signalling waning bullish momentum rather than an outright bearish shift. The lack of clarity warrants a neutral directional bias, placing greater emphasis on price action.

-- Written by David Scutt

Follow David on Twitter @scutty

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