Checking out EUR/AUD today with risk sentiment swinging positive and the pair about to retest a recently strong area of interest.
Will it break or draw in buyers?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/USD on bullish euro momentum, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
- U.S. new home sales fall; January revised sharply up
- Flash U.S. Services Business Activity Index at 39.1 (49.4 in Feb); Flash U.S. Manufacturing PMI at 49.2 (50.7 in Feb)
- Richmond Fed Manufacturing Activity rose from −2 in February to 2 in March
- COVID-19 outbreak leads to largest collapse in European business activity ever recorded
- Record contraction in Germany’s service sector as impact of coronavirus outbreak hits domestic economy
- ECB Intends to Be Major Buyer in Commercial Player Market, Villeroy Says
- ECB purchases of exchange-traded funds can’t be ruled out: Kazimir
- Flash PMI signals record slump in U.K. business activity amid emergency public health measures to halt spread of coronavirus
- Bank of England says coronavirus tougher than banks’ stress test
- Oil jumps 3% towards $28 on Fed steps to support economy
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Canada Parliamentary vote on Coronavirus Aid at 4:00 pm GMT
- API Crude oil inventory change at 8:30 pm GMT
- Bank of Japan Monetary Policy meeting minutes at 11:50 pm GMT
What to Watch: EUR/AUD
With no major catalysts ahead and the likely passing of more stimulus from central governments (most notably the delayed $2T in stimulus in the U.S.), it makes sense to go with the current positive risk flow we’re seeing in the markets today. That makes the slow grind lower in EUR/AUD one to watch as the Aussie seems to be the big winner from today’s flip towards risk-on behavior.
From a price action standpoint, we can see on the one hour chart above that the pair has seen selling pressure with every bounce higher over the last few sessions, but the 1.8100 major psychological level has been a tough one to crack. If the current risk-on behavior holds with no fresh catalysts to shift sentiment in either the euro or Aussie, then a break below/hold or break/momentum lower below 1.8100 is the time to put together a short-term short position.
And keep in mind that the daily ATR is around a huge 400 pips on this pair, which makes this interesting for both a day trading and swing trading opportunity from a potential return-on-risk point of view.
But if you’re a bull on the pair, either on a shift back to negative global risk sentiment, then watch out for a solid break above the falling ‘highs’ pattern before considering a long position. Even then, it’s still not a strong argument to be bullish, so look out for more negative coronavirus / global economic updates before raising your convictions on being long this pair.