There’s a potential top forming in EUR/AUD that could be confirmed by tonight’s Reserve Bank of Australia monetary policy announcement. The RBA is not expected to change interest rates but if they wanted to, they acknowledge the recent improvements in Australian data which would be exceedingly positive for the currency. Last night we learned that manufacturing activity accelerated and last month we saw improvements in the labor market, inflation and business conditions. The RBA is skeptical of the strength in the labor market (they think the data is volatile) but there’s no question that they have less to worry about in April compared to March. The last time the RBA met they expressed caution about the economy and the labor market but part of those concerns should be alleviated by recent reports. So if the central bank were to change their views it would be to include a tinge of optimism. The euro on the other hand doesn’t have much going on Tuesday. Emmanuel Macron is a shoe in at this stage to be the next French President so the uncertainty is removed which allows EURO traders to focus on the underlying performance of the region’s economy.

Technically, the daily charts clearly show a reversal in process in EUR/AUD. The recent rally stopped short of the 38.2% Fibonacci retracement of the 2012 to 2015 rally and we now expect the currency pair to make a run for the 200-day SMA at 1.4350.