Daily U.S. Session Watchlist: AUD/USD

The Reserve Bank of Australia is set to give its latest monetary policy statement, making the trend in AUD/USD a top watchlist candidate!

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

• ISM Manufacturing PMI comes in at 50.9 for Jan., the highest level since July, from an upwardly revised 47.8 in December
• Canadian manufacturing PMI: 50.6 in Jan. vs. 50.4 in Dec.
• China Cuts Rates, Injects Liquidity as Mainland Markets Sink
• Oil falls as coronavirus hits demand; OPEC+ considers deeper cuts
• China’s manufacturing activity in January expanded at its slowest pace in five months, coming in at 51.1
• UK Manufacturing PMI at 50.0 in December (Flash: 49.8)
• Eurozone Manufacturing sector contracts, but at slowest rate since April 2019
• German manufacturing PMI rose to an 11-month high of 45.3 in January, from December’s 43.7
• Johnson and Barnier Clash Over Who Sets Rules for Brexit Trade
• Commonwealth Bank Australian Manufacturing PMI: 49.6 in Jan. vs. 49.2 in Dec.
• Australian home prices start year on strong note, building to follow
• ANZ Australian Job Ads increased by 3.8% in January 2020 following a 5.7% fall in December 2019
• Japanese manufacturing weakness persists into 2020: 48.8 in Jan. vs. 48.4 in Dec. 2019

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

• ECB President Largarde speech at 6:00 pm GMT
• Fed Bostic speech at 9:30 pm GMT
• New Zealand Building consents at 9:45 pm GMT
• Australia New Home sales at 12:00 am GMT (Feb. 4)
• Reserve Bank of Australia Interest rate decision at 3:30 am GMT (Feb. 4)

What to Watch: AUD/USD

AUD/USD 1-Hour Forex Chart

Volatility could be picking up for the Australian dollar pretty soon with the latest RBA interest rate statement coming soon, making the recent weakness in AUD/USD one to watch. This is especially true given that expectations are that we’ll get a dovish tone from the RBA due the recent damage from the massive fires in Australia.

There are several scenarios to watch out for with this event, the first being the possibility of a pop higher on the event on a “buy-the-rumor, sell-the-news” reaction. It’s likely the recent weakness we’ve seen in the Aussie was already priced in, so profit taking (closing sell positions) could be something we see right after the announcement.

In this situation, very short-term traders could try to catch a few pips on the way up, but for longer-term players, if this reaction comes after truly dovish commentary from RBA on the economic outlook, then waiting for resistance to form is to consider for a short position. Watch the minor resistance area around 0.6750 for reversal pattern if this scenario plays out before considering a short play.

If the market immediately sells off on a dovish event, momentum sellers could hop in, but we have to note that the area around 0.6670 was the 2019 lows and very strong support area. An initial downward move may be limited at first, but if broken, could draw in mid to longer-term traders for a short position.