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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!

Equity Markets Bond Yields Commodities & Crypto
DAX: 10316.02 +2.39%
FTSE: 5688.18 +1.90%
S&P 500: 2710.75 +1.77%
DJIA: 23179.68 +2.20%
US 10-yr 0.748% -0.016
Bund 10-YR -0.35% -0.039
UK 10-YR: 0.316% -0.066
JPN 10-YR: 0.017% +0.01
Oil: 26.43 +5.34%
Gold: 1736.2 3.08%
Bitcoin: 7310.00 -1.16%
Etherium: 170.36 -2.01%

Fresh Market Headlines & Economic Data:

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

AUD/USD 1-Hour Forex Chart
AUD/USD 1-Hour Forex Chart

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.).