Aussie Strength Fuels Bearish Outlook for EUR/AUD and GBP/AUD

The EUR/AUD and GBP/AUD currency pairs are currently compressing within descending triangles, which is a bearish continuation pattern that suggests the broader downtrend from last year's highs may resume.

Relative rates have been favoring the Aussie against Europe, and recent correlation analysis shows that it's not just energy complex movements driving the strength of the Aussie dollar. Instead, relative rates, risk appetite, and industrial metals are playing a significant role in supporting the Aussie.

The graphic provided by LSEG shows that Germany (used as a proxy for the Eurozone) has had an inverse relationship with both pairs over 10- and 20-day windows. The S&P 500 futures, used as a proxy for broader risk appetite, also show an inverse relationship with the pairs.

The combination of these macro factors points to continued Aussie dollar strength relative to European crosses, adding to the case for renewed downside in EUR/AUD and GBP/AUD.