The euro is showing clear hawkish momentum. It is trading above $1.165 against the dollar, its highest level since mid-May, while markets fully price in an ECB rate hike in September after June’s initial tightening move. That conviction is supported by recent data: German Q2 GDP was revised up to 0.3% growth, and August business activity improved, particularly in German manufacturing. At the same time, elevated energy prices stemming from the ongoing Middle East conflict remain the ECB’s main concern, and markets are pricing in more than 40 bp of additional tightening for this year alone.

That backdrop matters for EUR/AUD because the cross tends to reflect not just policy differences, but also whether those policy signals are being reinforced by incoming data. In this case, the euro is getting both, while the Australian dollar is facing a harder mix of local hawkishness and external uncertainty.

The Australian dollar, by contrast, remains in a difficult position. The RBA delivered a hawkish hold on August 11, and Governor Bullock said the bank would "raise rates again if needed", but that stance has not translated into currency strength. RBA Deputy Governor Andrew Hauser reinforced the hawkish tone this week, pointing to the Middle East conflict, the AI investment boom, and weak productivity as key upside inflation risks. Even so, the AUD has underperformed most major peers, caught between domestic hawkishness and a broader risk backdrop it cannot fully control.

The result is an ECB that is gaining real traction on its hawkish pivot, while the RBA is sounding firm but struggling to make that message stick in the currency market.

Technical Analysis of EUR/AUD

As the EUR/AUD chart shows, the pair remains capped by a broader descending trendline drawn from late June highs near 1.6600. Price recently broke below 1.6300 support and is now testing a steeper short-term descending trendline. Adding interest to the setup, the RSI is forming a bullish divergence, making higher lows even as price posted a fresh low this week.

That leaves the next session or two important for confirming whether the recent momentum shift is merely a pause in the broader decline or the start of a deeper corrective move. For now, the chart still leans with the downtrend, but momentum is no longer one-way.

Bullish Scenario

If buyers break above the short-term descending trendline, the divergence would gain stronger technical credibility and open the way toward a retest of the 1.6300–1.6350 area, where the 50-period EMA is also located. A confirmed move above that zone, along with a break of the broader June trendline, would shift the structure more meaningfully and expose 1.6400–1.6450 resistance.

Bearish Scenario

If price is rejected again at the short-term trendline, sellers would remain in control, the divergence would be invalidated, and the pair could extend below the current 1.6255 level. In that case, the broader downtrend from June’s highs would remain firmly intact.

With EUR/AUD probing a fresh low while the RSI hints at fading downside momentum, the pair appears set for a decisive reaction.