Daily U.S. Session Watchlist: AUD/USD

It’s a risk-off kinda vibe to kick off the new week, and we’re checking out AUD/USD to play that sentiment as it tests a short-term strong interest level. Will upcoming Australian data give it the boost it needs to break?

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

• Oil falls after Trump plays down optimistic China trade reports
• China October new bank loans dip to 22-month low, more easing expected
• Fed’s Rosengren sees low likelihood of negative rates in U.S.
• Total U.K. production output was flat at 0.0% for Quarter 3 (July to Sept) 2019
• UK economy avoids recession with third-quarter growth rebound
• Brexit Party stands down hundreds of candidates in major boost to Boris Johnson
• Spanish election: deadlock remains as far right makes big gains
• BOJ members voiced concerns about ability to hit inflation target, minutes of October meeting show
• Japan’s current account surplus shrank 3.3% in first half
• Japan’s surprise decline in machinery orders raises doubts about business spending
• Japan economy watcher sentiment in Oct. drops to 8-year low after tax hike

Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:

• New Zealand immigration at 9:45 pm GMT
• Japan M2 money stock at 11:50 pm GMT
• Australia Business confidence at 12:30 am GMT
• New Zealand inflation expectations at 2:00 am GMT
• Japan Machine tool orders at 6:00 am GMT

What to Watch: AUD/USD

AUD/USD 1-Hour Forex Chart

We’ve got a negative tone to risk sentiment to start the week, likely after the news of Trump playing down optimistic China trade reports ( incorrect reporting about U.S. willingness to lift tariffs as part of a “phase one” agreement). So, without major catalysts expected for the rest of the Monday session, it’s likely risk-off sentiment will be a driver, making AUD/USD a great pair to play, especially when market drivers are related to the U.S.-China trade story.

On the one-hour chart above of AUD/USD, we actually see a clean technical setup in the works to play this sentiment as the market on consolidates just above 0.6850. This was a short-term support level at the end of October, so if it breaks, it could draw in technical/momentum sellers.

As long as the sentiment on the U.S.-China trade front stays sour, the signal to watch out for is a bearish one: a break-n-retest of the 0.6850 handle. In that scenario, it’s time to consider a short position and hold through the upcoming NAB Business confidence data, which has been on the downtrend in recent releases. With a daily ATR of around 40 – 45 pips, the next support area around 0.6800 is reachable within a day or two, making this a great short-term play if you’re bearish on AUD/USD and/or overall risk sentiment.

For AUD/USD bulls, no argument can be made at the moment for a long position, but IF U.S.-China sentiment reverses (which is a very possible scenario) then a break above the consolidation area is the technical signal to get interested in a position. Of course, the magnitude of any potential bull move would depend on the news cycle, but going for the next major psychological handle (0.6900) is well within the daily ATR, making it a viable short-term target.