AUD/USD hits the top of today’s watchlist with some classic technical patterns forming ahead of lots of Fed speak and the latest RBA meeting minutes.
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Fresh Market Headlines & Economic Data:
Dow turns negative, gives up 105-point gain as traders hope for stimulus deal ahead of deadline
U.S. Homebuilder sentiment sets another record high in October
House Speaker Pelosi ‘optimistic’ on coronavirus relief deal before U.S. election
Fed’s Bostic cautions that U.S. economic recovery is very uneven
ECB’s Holzmann sees no need for more stimulus now
Lagarde urges EU to consider recovery fund as permanent tool
ECB Lagarde says virus curbs will bolster economic uncertainty
U.K. prepared to rewrite lawbreaking Brexit Bill to get EU deal
U.K. home prices jump to record as sales reach all-time high
UK says no return to EU negotiations next year, need deal by January
Upcoming Potential Catalysts on the Economic Calendar
Fed Bostic speech at 6:20 pm GMT
Fed Harker speech at 7:00 pm GMT
New Zealand Business confidence at 9:00 pm GMT
RBA Kent speech at 11:00 pm GMT (Oct. 20)
RBA Monetary Policy Meeting Minutes at 12:30 am GMT
China House Price Index at 1:30 am GMT (Oct. 20)
What to Watch: AUD/USD
On the one-hour chart above of AUD/USD, we can see the pair has been in downtrend mode since last week, but seems to have stabilized over the past couple of sessions. This has formed a solid trendline on the falling ‘highs’ and the pair seems to be finding resistance at the Fibonacci retracement area marked on the chart above. And with stochastic signaling potentially over bought conditions, will sellers take control once again?
Well, we’ve got potential catalysts coming in the form of the RBA meeting minutes, and if we see any surprise dovish rhetoric in there, the move lower could pick up speed once again. We’ve also got Federal Reserve members giving speeches today, and unless we see surprise rhetoric of potentially increasing monetary stimulus measures, traders will likely continue to favor the Greenback over the Aussie for now.
If you’re bearish on the pair and expect dovish rhetoric from the RBA meeting minutes, then shorting from current levels up to the falling trendline/61% Fib area makes sense. It’s a high probability setup with good potential return-on-risk, and you can limit your losses quickly if the pair breaks above the falling trendline and you target the major psychological level of 0.7000.
If you’re bullish on AUD/USD and expect a scenario where the RBA meeting minutes walks back any possibility of negative rates vs. highly dovish rhetoric from upcoming Fed speeches (or the possibility of a fiscal stimulus deal from the U.S. coming soon), then watch out for a break above the falling trendline pattern / break-and-retest pattern before considering a long swing or short-term position.
