Markets are in a risk-off mode to kick off the new week, including EUR/AUD which just broke a strong area of interest. Will the bulls continue to run with events ahead from both Australia and Europe?
Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at a range setup on GBP/USD, 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:
Upcoming Potential Catalysts on the Economic Calendar
Japan Inflation Rate at 11:30 pm GMT
RBA Meeting Minutes at 1:30 am GMT (July 20)
China Loan Prime Rate at 1:30 am GMT (July 20)
Swiss Trade Balance at 6:00 am GMT (July 20)
German PPI at 6:00 am GMT (July 20)
Euro area Current Account at 8:00 am GMT (July 20)
What to Watch: EUR/AUD
On the one-hour chart above of EUR/AUD, we can see that the bulls didn’t miss a beat in the new week as the pair broke above the previously strong resistance area just under the 1.6000 handle.
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This move was likely catapulted by the strong risk aversion sentiment that’s hit markets on headlines that covid-19 cases are quickly on the rise and Australian lockdowns. That’s a scenario that isn’t likely to flip tomorrow, so the odds are likely traders will stay bearish on risk in the short-term.
With the strong possibility the bulls are likely to stay in control in the sessions ahead, we’re looking for a long play on EUR/AUD, but there is a technical case for a potential short-term pullback as we can see the stochastic not only signaling overbought conditions, but we can also see bearish divergence forming as well.
We also do have the RBA meeting minutes and mid-tier economic updates from Europe ahead, but the odds are they won’t be major volatility catalysts as no new insights are expected from the meeting minutes or German PPI data.
So, with those known factors in mind, we’ll consider a long position if the pair does pullback to the 1.6000 major psychological level. If that area is retested and holds with bullish reversal candles, that puts the probability back in the favor of the bulls for a new leg higher, especially if the RBA meeting minutes does not give any clues to a potential rate hike coming earlier than current expectations of late 2022.