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It’s a relatively quiet start to the new week, but price action could pick up in the upcoming sessions with flash manufacturing data on the economic calendar from Australia.

Will this event be enough to get the downtrend in AUD/NZD to pick up speed and present an opportunity for short-term pips?

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Fresh Market Headlines & Economic Data:

U.S. Existing home sales plunge in May, but Realtors think that was the bottom

Flash consumer confidence indicator recovered to a certain extent in both the euro area (+3.2) and the EU (+2.5)

ECB money-printing shouldn’t become ‘unbound’, says Weidmann

Bank of England’s Bailey says QE bond sales should precede rate rises

UK Manufacturer output volumes in the three months to June fell at the fastest rate on CBI survey record

Australian economy outperforming, but coronavirus ‘shadow’ could last years, warns RBA’s Lowe

New Zealand Credit Card spending jumped 52.8% m/m in May vs. a -39.1% m/m decline in April

The Conference Board Leading Economic Indexfor China decreased 0.9% in May 2020 to 148.1

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

ECB Lane speech at 4:30 pm GMT
Fed Kashkari speech at 10:30 pm GMT
Australia Flash Manufacturing & Services PMI at 11:00 pm GMT
Japan Flash Manufacturing & Services PMI at 12:30 am GMT (June 23)

What to Watch: AUD/NZD

AUD/NZD 1-Hour Forex Chart
AUD/NZD 1-Hour Forex Chart

It’s mostly quiet in FX land, but we did see some strong directional bias in the Kiwi today, beating out the majors for the session without an apparent catalyst behind the move. This could be on expectations of no interest rate cuts from the RBNZ this week, but we of course can’t be sure at the moment.

But since the momentum is there, we’ll pair the Kiwi with the Aussie as we could see volatility coming soon from the upcoming Australian flash manufacturing and services PMI. We can also see in the one hour chart above that the currency  pair is in a slow grind lower, with lower ‘highs’ signaling growing control by the bears, which could potentially create a support break around the area marked on the chart (around 1.0640)

So, it looks like the odds are in the bears’favor at the moment, and if we do see disappointing Aussie data later in the upcoming Asia session, a break below 1.0640 could draw in momentum selling. The next support target would be the previous swing low (around  1.0585), which is a little under the daily ATR range away, making it an achievable target within a session or two.

If you’re a bull on AUD/NZD and we do see some positive business sentiment data from Australia, then the break above the falling ‘highs’ pattern on the chart above is the scenario to watch out for.

If the bulls take control there (just under the 1.0700 handle) then consider a long swing position as the next resistance area (around 1.0725) is a poor risk-to-reward scenario go for if using the daily ATR as a stop guide.

If the market drifts lower ahead of the Asia session and the Australian data, then consider a long at the previous swing low, which offers a much better swing trade R: R if keeping a tight stop on the other side of the support and targeting the falling ‘highs’ pattern.