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The Reserve Bank of Australia’s latest interest rate decision will be coming very soon, likely to light a fire for short-term Aussie fireworks.

That makes this simple technical pattern on AUD/USD one to watch for a potential continuation of the uptrend, or a potential downside break or the rising ‘lows’.

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Fresh Market Headlines & Economic Data:

US heads into a new week shaken by violence and frustration

ISM Manufacturing PMI at 43.1 in May vs. 41.5 in April

US construction spending falls 2.9% in April with residential building down sharply

Sharp downturn in Canadian manufacturing conditions recorded in May

China tells state firms to halt purchases of major U.S. farm products

OPEC+’s Talks for Short Extension to Cuts Leave Oil Steady

Eli Lilly begins first human tests of an antibody drug against Covid-19

Lockdowns ease across Europe, Asia with new tourism rules

Final Eurozone Manufacturing PMI at 39.4 in May (Flash: 39.5, April Final: 33.4)

German Manufacturing staff cuts deepen in May as downturns in output and new orders remain severe 

French Business conditions deteriorate further in May, but at softer rate

Sharp downturn in UK manufacturing continues in May, but pace of contraction eases since April

EU boss Michel Barnier expects Britain to make big push to break Brexit deadlock this week

Australia Performance of Manufacturing index was up 5.8 points in May to 41.6

Rise in Japan’s first-quarter capex undercut by pandemic-driven profit slump

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

  • Australia New Home sales at 12:00 am GMT (June 2)
  • U.S. Total Vehicle sales at 12:00 am GMT (June 2)
  • Australia Business inventories, Current account at 1:30 am GMT (June 2)
  • RBA Interest Rate Decision at 6:30 am GMT (June 2)

What to Watch: AUD/USD

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

On the one hour chart above of AUD/USD, we can see an upside break of an ascending triangle pattern over the past couple of sessions.

This tends to draw in momentum buyers, especially in longer-term uptrends, like the one we’ve seen in the pair since mid-March.

This could be the start of another leg higher, sustained by continuing positive global risk sentiment (supported by lockdown easing and COVID-19 therapies/vaccine developments) and the expectation that the RBA will not ease any further at their upcoming meeting, hinted at their last meeting in May.

So, if you’re a bull on the pair, consider entering into long position from current levels break down to the ascending triangle resistance (around 0.6685) is a valid option, although if you’re the more conservative, scaling in heavier closer to the break (or maybe waiting for a retest) makes more sense given the top tier event ahead.

If you’re a bear on the AUD/USD, possibly on a surprise negative tone from the RBA and/or a shift in global risk sentiment (e.g., escalating U.S.-China tensions, rising U.S. civil unrest, negative coronavirus developments), then a break below the rising ‘lows’ is the signal to watch before considering a short position.

It’ll likely take both scenarios for this price action to play out, but if it does, the momentum lower could be high given the extent of the recent rally in risk assets.