Potential Bottom Could Incentivize Bulls to Accumulate at Multi-Month Lows

Forex

Economic

Summary:

This structural resilience is increasingly attracting buyers, as the "buy the dip" opportunity at these multi-month lows becomes technically compelling.

BUY EURAUD

EXP

TRADING

1.67998

Entry Price

1.71900

1.66800

1.67332 -0.00751 -0.45%

0.0

Pips

Flat

1.66800

Exit Price

1.67998

Entry Price

1.71900

The Reserve Bank of Australia (RBA) opted to raise the official cash rate by 25 basis points to 3.85% on February 3, a move that perfectly synchronized with broad market consensus. Alongside this tightening, the central bank revised its short-term economic projections upward; growth and inflation are now forecasted at 2.1% and 4.2%, respectively, by June 2026—a notable increase from prior estimates of 1.9% and 3.7%. These updated figures are grounded in the hawkish assumption that the cash rate will likely reach 4.2% by the end of 2026.

Despite this proactive stance, consumer sentiment metrics continue to exhibit significant fragility. The Westpac-Melbourne Institute Sentiment Index retreated for the third consecutive month, underscoring the persistent pressure high interest rates are exerting on household discretionary spending. This trend bolsters the argument for a potential pause in the RBA’s tightening cycle during the upcoming March meeting. Meanwhile, the latest NAB Business Survey provided conflicting signals; while business confidence edged slightly higher to +3, overall business conditions moderated to +7. Trading and profitability indicators showed a loss of momentum, though future orders recovered to +2, hinting at a gradual stabilization in demand expectations. Notably, while capacity utilization dipped to 82.9%, it remains 1.5 percentage points above its long-term average. It is critical to note that this survey was conducted prior to the recent rate hike, meaning the full impact of the RBA's latest decision is not yet reflected in the data.

Across the globe, the European Central Bank (ECB) recently maintained its benchmark interest rates during the February policy meeting, aligning with market expectations. However, the accompanying discourse possessed a markedly more hawkish tone, as the governing council emphasized the Eurozone’s underlying economic resilience. President Christine Lagarde downplayed recent inflationary cooling and dismissed concerns regarding the Euro’s appreciation, noting that the currency remains well within its historical range. Eurozone GDP is currently projected to expand between 0.2% and 0.3% quarter-over-quarter, supported by robust internal demand and a resilient service sector, even as manufacturing continues to face structural headwinds. Potential Bottom Could Incentivize Bulls to Accumulate at Multi-Month Lows_1

Potential Bottom Could Incentivize Bulls to Accumulate at Multi-Month Lows_1

Technical Analysis

From a technical perspective, EURAUD is once again testing the critical 1.6793 support level, a floor that has consistently rejected bearish attempts to break lower over recent sessions. This structural resilience is increasingly attracting buyers, as the "buy the dip" opportunity at these multi-month lows becomes technically compelling.

On the 4-hour (H4) chart, the 100 and 200-period Moving Averages (MAs) are situated at 1.7048 and 1.7252, respectively. These averages are currently tracking the broader bearish trend and would act as primary dynamic resistance zones in the event of a reversal. Our primary upside objective for a corrective move is the 0.618 Fibonacci retracement level at 1.7194, which is nestled strategically between the two moving averages. A decisive H4 candle close above the 9-period EMA would serve as the first confirmation that bulls have successfully regained control of the short-term narrative.

Our momentum analysis via the MACD provides a strong precursor for a potential change in trend. While price action has printed flat or marginally lower lows, both the MACD histogram and signal lines are making higher lows, creating a classic bullish divergence. This setup is often a reliable indicator of an impending technical bounce or trend reversal.

Additionally, the RSI has climbed to the 40 level, successfully recovering from deeply oversold territory at 18. This indicates significant room for upward expansion before the pair encounters overbought conditions. Conversely, traders should remain vigilant; a definitive break below the 1.6800 psychological threshold would invalidate this bottoming thesis and open the door for a deeper bearish extension.

Trading Recommendations

Trading direction: Buy

Entry price: 1.6800

Target price: 1.7190

Stop loss: 1.6680

Validity: Feb 20, 2026 15:00:00

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Potential Bottom Could Incentivize Bulls to Accumulate at Multi-Month Lows

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