Daily U.S. Session Watchlist: EUR/AUD

With a relatively quiet economic calendar ahead and the U.S. on holiday tomorrow, trends may continue to run further in the short-term. And this strong recent move in EUR/AUD should be one to watch with the lone potential top tier catalyst coming from Australia soon.

Intermarket Snapshot

Fresh Market Headlines & Economic data:

• U.S. private sector hiring picks up less than expected in June: ADP
• U.S. trade deficit surges to five-month high as imports soar
• U.S. weekly jobless claims fall more than expected
• U.S. based employers announced plans to cut 140,577 jobs Q2 of this year vs. 190,410 cuts in Q1
• UK economy shrinks as Brexit, global worries mount: PMI
• Brexit Withdrawal Agreement will stand as it is, says German ambassador
• German Service sector ends second quarter strongly, but outlook darkens
• IHS Markit Eurozone Services PMI; Solid growth of euro area signaled in June
• Italy avoids EU sanction threat over its debt, for now
• Australian building approvals increased by 0.7% vs. a revised -3.4% in the previous month
• Australia Trade Surplus Rockets to Record on Resurgent Iron Ore
• AIG Australian Performance of Services Index fell by 0.3 points to 52.2 points in June 2019 (seasonally adjusted)
• Global dairy prices fall for fourth consecutive auction
• The ANZ World Commodity Price Index fell 3.9% m/m in June, to record its first decrease this year
• BOJ policymaker sees no need for immediate easing

Upcoming Potential Catalysts on the Forex Calendar:

• Australian Retail sales at 2:30 am GMT (July 4)
• Switzerland CPI at 7:30 am GMT (July 4)
• ECB’s Lane speaks in Frankfurt at 8:00 am GMT (July 4)
• Europe Retail sales at 10:00 am GMT (July 4)

What to Watch: EUR/AUD

EUR/AUD 1-Hour Forex Chart

EUR/AUD has been on a tear lower over the past week, thanks to improving trade war rhetoric between the U.S.-China and likely on the idea we’ll see more stimulative actions from central banks in the near future. Meanwhile, the euro takes continues to see pressure as economic data continues to disappoint, strengthening the argument for the ECB to cut interest rates once again later this year.

This brings EUR/AUD to a major support area just above the minor psychological level of 1.06050, which looks to be flimsy at the moment and ready to break. The upcoming Australian retail sales data is likely to bring volatility once again to the pair, and if that brings in more Aussie sellers, look for technical traders to likely hop in given the lack of top-tier events from both the Euro area and Australia for the rest of the week.

With a daily ATR of around 85 pips, the next major psychological level of 1.6000 should be easily reached in the next session or two if the major driving themes remain unchanged, so the potential short-term return on risk isn’t that exciting at the moment. But given that the pair is in a strong momentum move lower, it makes sense to see if 1.6000 breaks for an even bigger move lower.

For the bulls, it’s possible we’ll get support at current levels, arguably on profit-taking after such a strong move lower, and if Australian retail sales disappoint to strengthen the case for an RBA rate cut (a move that doesn’t seem likely for now after the last RBA meeting).

Look for this area to hold and for bullish reversal candles throughout the rest of the U.S. session, and if we see the combo scenario of weak Aussie retail sales and better-than-expected European retail sales, a daily ATR move is not out of the question to retest the minor resistance area around 1.6150 that traders saw at the end of May in the next few sessions.