Daily U.S. Session Watchlist: EUR/AUD

In this risk-on environment, downside momentum in EUR/AUD hits the watchlist today ahead of potential catalysts from Australia.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on USD/JPY ahead of the ADP employment update, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

• U.S. Private payrolls soar in January, the best monthly gain in nearly 5 years
• The U.S. monthly international trade deficit increased in December 2019 to $48.9B vs. $43.1B in November
• U.S. Business activity growth accelerates to 10-month high at start of 2020′
• January’s ISM non-manufacturing index comes in at 55.5, vs 55 expected
• IHS Markit Eurozone Composite PMI – economy registers stronger growth at start of 2020
• Volume of retail trade down by 1.6% in euro area; Down by 1.3% in EU27
• Rebound in new work underpins strongest growth of U.K. service sector activity since September 2018
• SNB’s Jordan says coronavirus adding to pressure on Swiss franc

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

• Bank of Canada Wilkins speech at 5:15 pm GMT
• Fed Brainard speech at 9:10 pm GMT
• Australia Trade balance & Retail sales at 12:30 am GMT (Feb. 6)
• Bank of Japan Masai speech at 1:30 am GMT (Feb. 6)

What to Watch: EUR/AUD

EUR/AUD bears have had some nice momentum over the past couple of days as global risk sentiment turned more positive, likely due to recent optimism of a Coronavirus vaccine coming and recent stimulative efforts by global central banks, most notably the People’s Bank of China (China injects $71bn into banks).

Looking forward, we’ve got potential catalysts for the Aussie coming soon with the latest updates on retail sales and trade balance for Australia, which could keep the EUR/AUD bear part going, or prompt profit taking on bullish Aussie positions. Expectations are for a dip in retail sales but a widening surplus in trade, so keep a close eye on the actual numbers and market reaction before settling in on a directional bias.

For EUR/AUD bulls, a net weaker Australian economic update and a negative shift in the Coronavirus story is likely the fundamental signal to consider long position, especially if the current market reverses to the upside. From a technical perspective, odds are probably better than even at the moment given that the market is current testing a previous swing low area and the stochastic is in oversold territory.

For EUR/AUD bears looking to play the current short-term trend, better-than-expected Australia data and more positive Coronavirus updates could drive the pair lower in the short-term, making a break of the previous swing low / minor psychological level around 1.6250 a signal to start putting together a short position. If the market moves higher before the data is released, watch the 1.6400 – 1.6450 area for bearish patterns before setting up a short position. The daily ATR on the pair is around 100 pips, so using that as a stop guide and targeting the previous swing lows around 1.6250 makes for a strong potential return-on-risk.