The ECB brought the boom to the FX markets today with its latest monetary policy decision, and with risk sentiment swinging positive, EUR/AUD looks like the pair to play into the weekend!
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 12403.07 +0.36% FTSE: 7338.08 0.00% S&P 500: 3014.44 +0.45% DJIA: 27245.10 +0.40% |
US 10-yr 1.742% +0.009 Bund 10-YR -0.549% +0.018 UK 10-YR: 0.644% +0.007 JPN 10-YR: -0.223% +0.037 |
Oil: 55.07 -1.22% Gold: 1515.00 +0.79% Bitcoin: 10301.04 +1.93% Etherium: 179.58 +1.22% |
Fresh Market Headlines & Economic Data:
- European Central Bank cuts its deposit rate, launches new bond-buying program
- Highlights: Draghi comments at ECB press conference
- Trump delays tariff hikes on Chinese goods ahead of talks
- US consumer prices rise a slight 0.1% in August
- New Canadian housing prices were down 0.1% at the national level for the third consecutive month in July
- U.S. Oil Industry Grabs Another Crown From Saudi Arabia
- Industrial production down by 0.4% in euro area; Down by 0.1% in EU28
- China Foreign direct investment up 6.9% y/y in yuan terms
- The Aug. 2019 RICS Residential Market Survey results point to a renewed deterioration in U.K. sales expectations
- New Zealand food prices rose 0.7% in August, 0.4% (SA)
- Japan’s machinery orders slip as trade gloom hits business spending
- Japan PPI -0.3% m/m in Aug. vs. 0.0% m/m in July
- Japan Indices of Tertiary industry activity rose 0.1% (SA) m/m to 106.9
Upcoming Potential Catalysts on the Forex Calendar:
- New Zealand Manufacturing index at 11:30 pm GMT
- Japan Industrial production at 5:30 am GMT (Sept. 13)
- German Wholesale prices at 7:00 am GMT (Sept. 13)
- European Trade balance at 10:00 am GMT (Sept. 13)
- U.S Retail sales at 1:30 pm GMT (Sept. 13)
- U.S. Consumer sentiment at 3:00 pm GMT (Sept. 13)
What to Watch: EUR/AUD
The ECB delivered on the expectations of fresh monetary policy stimulus today, sending the euro lower on a brief trip lower before buyers stepped in for some profit taking, and likely on the idea the ECB wasn’t dovish as expected. This event plus the latest news that Trump may delay tariff hikes ahead of the next round of trade talks with China has traders in a global risk taking mood.
This environment won’t likely change before the end of the week given the lack of schedule major catalysts, making the short-term downtrend in EUR/AUD the market to watch for a potential play for some pips into the weekend. After today’s roller coaster ride in reaction to the ECB event, the pair is basically retesting the falling ‘highs’ pattern and it seems like the bears are holding ground around the 1.6050 minor psychological level.
If you’re a bear on this pair and think market conditions should hold into the weekend, the current market up to 1.6100 looks like a strong resistance area to short. Just keep in mind that the daily ATR is over 100 pips, so give this position plenty of room to breathe with your stop, but with the strong trend lower supported by the fundies, the target of the event swing lows (1.5900ish) and beyond does make the potential R:R interesting.
For the bulls, it’ll likely take a surprise geopolitical event or short-term profit taking going into overdrive to shift sentiment short-term. If we do see either/both scenarios, coupled with a break-retest-and-hold of the 1.6100 handle, this should be looked at as a swing opportunity for next week depending on the geopolitical catalyst.