AUD/USD hits the watchlist for a short-term setup as momentum picks up on fresh catalysts. Are there still pips to catch or is a reversal ahead?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on USD/CAD ahead of the OPEC meeting, 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:
- Federal Reserve unveils details of $2.3 trillion in programs to help support the economy
- Unemployment claims surge by 6.6 million as coronavirus continues to rout U.S. workforce
- The Labor Department said on Thursday its producer price index for final demand slipped 0.2% last month after dropping 0.6% in February
- Canada loses over a million jobs because of coronavirus
- German Trade Balance: 21.6B euros in Feb vs. 18.7B euros in Jan.
- EU risks break-up over ‘coronabonds’ row, warns Italian PM
- ECB’s Lagarde says large-scale debt cancellation ‘unthinkable’
- UK gross domestic product rose by 0.1% in the December-February period: Office for National Statistics
- Bank of England to finance UK government if markets turn sour
- UK PM Johnson improving but still in intensive care in COVID-19 fight
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- OPEC+ Meeting & Production cut decision (tentative)
- Japan Bank lending & PPI at 11:50 pm GMT
- China Inflation at 1:30 am GMT (Apr. 10)
What to Watch: AUD/USD
We’re checking out AUD/USD as a momentum play has formed on the one hour chart above. Over the past week or so, we’ve seen the pair form a rising triangle with resistance around the 0.6200 handle, which was broken yesterday as risk sentiment moves positive with the recent hopes of a slowing coronavirus cases/deaths.
And today, we just saw a spike higher due to Dollar weakness, sparked by the announcement of another stimulus package from the Federal Reserve. This is likely to put pressure on the Greenback in the short-term, as well as lift global risk sentiment which should continue to benefit the Australian dollar.
So, after a strong move higher, it’s prudent to probably wait for a pullback to play a long position if market drivers do not change for the next session or two. The daily ATR on this pair is around 145 pips, so a retest of the broken resistance / psychological level of 0.6200 is in reach within the next couple of sessions if there is a pull back.
For those who are more aggressive, consider scaling into a long position from current levels down to the 0.6200. This reduces the risk of missing out on further upside moves, but also reduces the potential return-on-risk, depending on your exit points.
For the bears, it’s a tough argument to make right now for a short position, especially with the Fed pumping out more stimulus, but you may get a chance to express your views later if Chinese inflation severely disappoints during the Asia session, and/or we get a fresh negative global risk event (e.g., failure to cut oil production, tighter/longer lockdowns to control the virus, etc.).