Synopsis:

ING forecasts a downward trend in EUR/AUD, anticipating a move towards 1.60 as the Reserve Bank of Australia (RBA) maintains its stance and potential support measures from China influence the market.

Key Points:

1. Current Market Trend:

   • EUR/AUD is showing a decline, reflecting a broader reflationary environment and a steeper US yield curve.

2. RBA's Position:

   • The RBA is expected to continue its semi-hawkish approach, being one of the last G10 central banks to consider cutting rates.
   • This stance is likely to bolster the Australian dollar against the euro.

3. China's Economic Measures:

   • Speculation surrounding potential domestic support measures from China, expected to be announced by the People's Bank of China, may provide additional support for the AUD.

4. Technical Levels:

   • ING anticipates EUR/AUD may retest recent lows around 1.6250 and potentially reach the 1.60 level over the coming weeks and months.

Conclusion:

The combination of the RBA's cautious approach and potential support from Chinese economic measures is expected to drive EUR/AUD lower, reinforcing a bearish outlook in the near term.