With potential volatility catalysts ahead from Australia, this rising market in EUR/AUD is one to watch, especially as it forms simple technical setups for both the bulls and the bears.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on AUD/USD as risk appetite rises on U.S. stimulus speculation, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
Stocks rise for a second day as traders await clues on fiscal stimulus talks
Bitcoin extends gains after PayPal move to accept cryptocurrencies
Fed’s Brainard calls for more stimulus from Congress amid ‘highly uneven’ recovery
Canadian new housing prices were up 1.2% in September following a 0.5% increase in August.
Canadian consumer prices rose 0.5% on a year-over-year basis in September, up from a 0.1% increase in August
Canadian retail sales rose 0.4% to $53.2 billion in August
EU tells Britain to make up its mind as Brexit deal ‘within reach’
U.K. consumer price index rises +0.4% m/m in Sept. vs. -0.4% previous
BoE’s Ramsden sees no case for negative rates now
Upcoming Potential Catalysts on the Economic Calendar
ECB Guindos speech at 4:00 pm GMT
Fed Beige Book at 6:00 pm GMT
RBA Deputy Governor Debelle speech at 10:30 pm GMT
Australia Business Confidence at 12:30 am GMT (Oct. 22)
What to Watch: EUR/AUD
On the one-hour chart above of EUR/AUD, we can see the pair is currently in an uptrend, likely mainly pushed higher by recent Aussie weakness related to speculation that negative rates may be coming to Australia.
But in today’s session, we can see the pair has pulled back, likely with the help of rising risk sentiment and U.S. stimulus hopes, bringing the market to a potential short-term support area.
On the chart, we’ve marked the Fibonacci retracement area of the recent swing move higher, along with a trendline connecting a rising ‘lows’ pattern in the works. We can also see that the stochastic indicator is signaling potentially oversold conditions, which when combined with the other technical arguments, could draw in buyers very soon.
So, the odds are in favor of the bulls right now, but we’ve got potential catalysts from Australia in the form of a speech from Reserve Bank of Australia Deputy Governor Debelle, as well as Australian business confidence data.
The scenario to watch out for before getting bullish is if we continue to see negative rate rhetoric from Debelle and/or declining business confidence. Combine that with bullish reversal patterns at the Fibonacci area and the odds of the trend higher resuming increases. And if broad global risk sentiment turns sour over the next session, that increases the odds of the pair moving higher even further.
And vice versa, the opposite scenario would likely be bearish for the pair (i.e., Debelle talks the idea of negative interest rates coming and AU business confidence rises), especially if broad risk sentiment stay generally positive. In that case, look for a break below the trendline for break-and-retest patterns or momentum moves before considering a short-term position.
