Flowing with the major driving themes for today’s watchlist with a light calendar ahead, we see a potential setup on AUD/USD that has a good chance of pulling in some pips!
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Fresh Market Headlines & Economic Data:
- Dow drops more than 100 points as Middle East turmoil sparks geopolitical worries
- Oil prices jump 1% in early trading as tensions in the Middle East mount, Brent crude tops $70
- China’s services sector expands at slower pace in Dec as confidence dips: Caixin PMI
- U.S. Business activity growth accelerates to five month high in December
- Fed’s Williams says it is important to keep 2% inflation target amid low rates: WSJ
- Canadian Industrial Product Price Index (IPPI) rose 0.1% in November, after posting no change in October.
- Decisive UK election result cheers companies: PMIs
- German Service sector sees positive end to 2019
- Eurozone economy remains close to stagnation at end of 2019
- Sentix Investor confidence surprises with a 7.6 read in Jan. vs. 0.7 in Dec. 2019
- Industrial producer prices up by 0.2% in euro area; Up by 0.1% in EU28
- Australia Manufacturing PMI up 0.2 to 48.3 (SA) in December
- Australian fires hit key dairy regions, adding to woes from drought
- BOJ’s Kuroda says will guide policy carefully with eye on Iran tensions
- Japanese manufacturing sector ends 2019 stuck in a downturn
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Australian Job advertisements at 12:30 am GMT (Jan. 7)
- Japan Services PMI at 12:30 am GMT (Jan. 7)
What to Watch: AUD/USD
We don’t have much in the way of economic catalysts on the upcoming forex calendar, so we’re looking at the themes driving the current price action for short-term volatility. That continues to be the tensions between the U.S. and Iran sparking risk-off behavior in the global markets, and with think there’s extra action in Australia (the terrible brush fires ravaging the country) that could be adding to Aussie pressure. And we just got fresh business sentiment data from the U.S. pointing to positive business activity at the end of 2019.
This lines up with the price action on AUD/USD, and on the one hour chart above, we can see the pair has been in a recent downtrend, mostly driven by the risk-off behavior that typically benefits the dollar over the Aussie. The pair does seem to be finding support once again at a previous area of interest (around 0.6930), so the situation to watch out for today is a break below that area and sellers to add momentum to the downside move. Or we you wait for a break-and-retest scenario in which the market bounces higher after the break to the 0.6930 area and resistance forms before considering a short position in AUD/USD.
For the bulls, if the support holds and we see a significant turn in the U.S.-Iran tensions (a very low probability scenario at the moment), then a strong bounce is likely to occur, which may gain some support with a positive read on Australian job ads data later on. Don’t forget that the U.S.-China trade story is still live, albeit on the back burner at the moment, and any positive notes there could support AUD/USD in the short-term.