Escalation of tensions in the Middle East got me looking at AUD/USD possibly reversing its trend on the 1-hour time frame. What do you think?
Fresh Market Headlines & Economic Data:
- Iran fires missiles at U.S. bases in Iraq
- Stocks, gold and oil whipsawed as Iran strikes spark fears of wider Mideast war
- U.S. factory orders tumble in November
- AIG construction index lower in December
- Australia’s building approvals jumps by 11.8% vs. 2.1% expected, 7.9% decline in October
- Japan’s consumer confidence improves from 38.7 to 39.1 in December
- Boris to stress trade deal deadline in EU meeting
- Carney: not clear that monetary policy would “have sufficient space” to combat anything worse than a “conventional recession”
Upcoming Potential Catalysts on the Forex Calendar:
- Germany’s factory orders at 7:00 am GMT
- France’s trade balance at 7:45 am GMT
- U.K.’s Halifax house price index at 8:30 am GMT
- U.S. ADP report at 1:15 pm GMT
- President Trump to give a speech about Iran’s attack
What to Watch: AUD/USD
Earlier today word got around that Iran had fired missiles at at least two Iraqi facilities that were hosting U.S. forces.
Uncertainty over the details of Iran’s attacks and the extent retaliation from the U.S. initially dragged on high-yielding bets like the Aussie. Markets soon calmed down, however, and a bit of profit-taking ensued.
This profit-taking now sets AUD/USD up to a possible retracement all the way to .6925. As you can see, the area of interest lines up with a 38.2% Fib and broken trend line resistance on the 1-hour time frame. It also helps that the 100 SMA has just crossed below the 200 SMA.
A quick look at MarketMilk tells us that AUD/USD’s bearish trend is intact on the daily. And while short-term moving averages show “bullish” tendencies on the 1-hour time frame, longer-term moving averages still point to a bearish run.
Iranian officials share that the attacks “concluded” its response to the U.S. killing Qassem Soleimani a few days earlier. If tensions ease over the next couple of hours, then we could see bullish pressure that could propel AUD/USD to the broken trend line.
But if Trump’s scheduled speech later today hints at further escalation of military attacks, then AUD/USD might not wait for .6925 before it extends its bearish momentum.