• EUR/AUD is rising despite a run of weak data from the Eurozone and lower inflation expectations. 
• In comparison data from Australia has been relatively robust of late, particularly sentiment and wage data. 
• Monetary policy is diverging with the ECB likely to cut interest rates further, leading to a bearish backdrop for EUR/AUD. 

EUR/AUD is exchanging hands in the 1.6630s on Wednesday, up a third of a percent on the day. The pair has fallen about 3.3% in just over a week since the 1.7186 high reached on August 5. Despite the current uptick, the short-term trend is bearish and since “the trend is your friend” the pair is vulnerable to more downside. 

EUR/AUD has weakened primarily due to an ebbing away of US recession fears which temporarily weakened the Australian Dollar (AUD) due to its sensitivity to negative risk sentiment. The differing outlooks for monetary policy of the two currencies and comparably resilient recent Australian macroeconomic data are further drivers of the pair’s decline since the August 5 high.