The euro heads into this week's ECB meeting (September 9–10) with genuine hawkish backing. Insiders indicate that policymakers are prepared to raise rates again to counter the inflationary side-effects of the Middle East conflict, even as they show little appetite for tightening beyond that. In July, the ECB held rates at 2.25%, with Lagarde explicitly warning that renewed hostilities and the resulting oil price rebound pose upside risks to the inflation outlook. That keeps the door firmly open to a move back to 2.50% this week.

The Australian dollar, meanwhile, is enjoying one of its strongest stretches in months, hitting a fresh three-month high after Q2 GDP beat expectations at 0.4% quarter-on-quarter. This has reinforced bets that the RBA could resume tightening this month. Markets now price a 50–58% chance of a September hike, with a November move seen as effectively locked in. Commodity strength and Australia's growing role in the AI infrastructure boom add further structural support to the currency.

The result: two hawkish central banks converging on rate decisions within days of each other, leaving EUR/AUD's next move to hinge on whether Frankfurt or Canberra delivers the more convincing signal. For a cross-rate like EUR/AUD—neither currency involving the US dollar—the relative policy path matters more than either bank's decision in isolation, which is why the pairing of these two meetings has amplified the pair's sensitivity to headline surprises, guidance language, and rate-market repricing on both sides.

Technical Analysis of EUR/AUD

As the EUR/AUD chart shows, the pair has been trading within a steep descending trendline since mid-August's highs near 1.6441, with price now testing the confluence of this trendline and the 0 Fibonacci level near 1.6086. Adding intrigue to the setup, the RSI is forming a bullish divergence, printing higher lows even as price carved a fresh low this week. Divergences of this kind—where momentum fails to confirm a new price low—are watched by traders as an early warning that selling pressure may be waning, though they remain a signal about momentum rather than a guarantee of reversal while price itself still respects the downtrend.

Bullish Scenario

Should buyers break above the descending trendline, the divergence would gain real technical credibility, opening the path towards the 0.382 retracement near 1.6222, with a stronger move potentially targeting the 0.5 level around 1.6264.

Bearish Scenario

Conversely, a continued rejection at the trendline would keep sellers in control, invalidating the divergence and exposing fresh lows below the 1.6086 level, with the broader downtrend from August's highs remaining firmly intact.

With price testing a fresh low right at the trendline while the RSI quietly hints at fading downside momentum, EUR/AUD looks poised for a decisive reaction. Will the ECB's hawkish stance finally show up on the chart, or will the RBA's own tightening momentum keep this downtrend alive?