EUR/AUD: A Hawkish Euro Meets a Stubborn Downtrend

The euro is riding genuine hawkish momentum right now. It’s holding above $1.165 against the dollar, its strongest level since mid-May, with markets fully pricing in an ECB hike in September following June’s initial tightening move. That conviction is backed by real data: German Q2 GDP was revised up to 0.3% growth, and August business activity showed clear improvement, especially in German manufacturing. Elevated energy prices from the ongoing Middle East conflict remain the ECB’s main concern, keeping the door open to more than 40 bp of additional tightening priced in for this year alone.

The Aussie, meanwhile, is stuck in a genuinely tricky spot. The RBA delivered a hawkish hold on August 11, with Governor Bullock confirming the bank would “raise rates again if needed”, but that resolve hasn’t translated into currency strength. RBA Deputy Governor Andrew Hauser reinforced the hawkish tone this week, flagging the Middle East conflict, the AI investment boom, and weak productivity as key upside inflation risks, yet the AUD has still underperformed most major peers, caught between domestic hawkishness and a broader risk backdrop it can’t fully control.

The result: an ECB gaining real traction on its hawkish pivot, against an RBA talking tough but struggling to make it stick.

Technical Analysis of EUR/AUD

As the EUR/AUD chart shows, the pair remains capped by a broader descending trendline from late June’s highs near 1.6600, with price recently breaking below the 1.6300 support and testing a steeper short-term descending trendline. Adding intrigue to the setup, the RSI is forming a bullish divergence, printing higher lows even as price carved out a fresh low this week.

Bullish Scenario

Should buyers break above this short-term descending trendline, the divergence would gain real technical credibility, opening the path toward a retest of the 1.6300–1.6350 area, where the 50-period EMA also sits. A confirmed break above that zone and the broader trendline from June would shift the structure meaningfully, with scope to challenge the 1.6400–1.6450 resistance.

Bearish Scenario

Conversely, a continued rejection at the short-term trendline would keep sellers in control, invalidating the divergence and exposing fresh lows below the current 1.6255 level, with the broader downtrend from June’s highs remaining firmly intact.

With price testing a fresh low right as the RSI quietly hints at fading downside momentum, EUR/AUD looks poised for a decisive reaction. Will the euro’s hawkish momentum finally show up on the chart, or will the Aussie’s resilience keep this downtrend alive?

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