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With the highly anticipated monetary policy and rate decision from the Reserve Bank of Australia right around the corner, the Aussie is likely to be the big mover in the upcoming session. And price action in AUD/NZD seems to have opportunities setting up, whether you’re a bull or bear, longer-term or short-term trader.

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Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar:

  • New Zealand Business confidence at 10:00 pm GMT
  • Australia Manufacturing index at 11:30 pm GMT
  • Japan Unemployment rate at 12:30 am GMT (Oct. 1)
  • Japan Tankan Manufacturing & Services indexes at 12:50 am GMT (Oct. 1)
  • Japan Manufacturing PMI at 1:30 am GMT (Oct. 1)
  • ECB’s Lane speaks in Los Angeles at 2:00 am GMT (Oct. 1)
  • Australia Building approvals at 2:30 am GMT (Oct. 1)
  • Reserve Bank of Australia Rate decision at 5:30 am GMT (Oct. 1)
  • Australia Commodity Index at 7:30 am GMT (Oct. 1)
  • Fed’s Evans speaks to Bundesbank at 8:15 am GMT (Oct. 1)
  • Swiss Manufacturing PMI at 8:30 am GMT (Oct. 1)
  • European Manufacturing PMI updates starting 8:45 am GMT (Oct. 1)
  • U.K. Manufacturing PMI at 9:30 am GMT (Oct. 1)
  • European CPI Estimate at 10:00 am GMT (Oct. 1)
  • RBA Governor Lowe speaks at 10:20 am GMT (Oct. 1)
  • Canada GDP m/m at 1:30 pm GMT (Oct. 1)

What to Watch: AUD/NZD

AUD/NZD 1-Hour Forex Chart
AUD/NZD 1-Hour Forex Chart

In case you haven’t seen yet in this week’s upcoming catalysts, the latest monetary policy / interest rate decision from the Reserve Bank of Australia is likely to rock the Australian dollar. And with a potential catalysts coming up for the Kiwi in the form of the latest business confidence data from New Zealand, it’s highly likely we’ll see some action in AUD/NZD very soon.

In terms of price action, AUD/NZD has been in somewhat of a ranging pattern over the past few weeks, trading somewhere in the range of 1.0700 to 1.0825. So if we don’t get any surprises from the RBA (expectations of 25 bps cut) and NZ business confidence (data has been in a downtrend) in the upcoming session, odds are that volatility may be contained in the range. In this scenario, reversals around the top of the range and the bottom of the range should be on your watchlist for the next few sessions on this pair.

If we get a surprise, especially from the RBA, a big spike in volatility is likely the case. And if you’re a bear on AUD/NZD, a break/retest/hold of the 1.0700 handle should be the scenario to look out for before considering a swing short position. For the more aggressive traders out there, shorting on a break of 1.0750 is something to consider given the likelihood of a momentum move in that scenario, especially if NZ business sentiment improved.

If you’re a bull on AUD/NZD, a surprise hold on interest rates from the RBA will likely spark a bounce higher in the pair, especially if NZ business sentiment data disappoints. A move higher would be inline with the longer-term trend higher in the pair since August, therefore could draw in more traders if this scenario plays out. In this case, watch for a break of the recent resistance around 1.0825 before going long, or if the RBA holds and the market reacts by dropping to 1.0700, consider a long position there as the potential R:R and probability of success looks very favorable.