The Aussie is on the move higher on the session to spark some interesting technical setups, including a resistance break on AUD/USD. Will it gain some legs with the upcoming potential catalysts from Australia?
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Fresh Market Headlines & Economic Data:
Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:
Japan Inflation Rate at 11:30 pm GMT
Australia RBA Meeting Minutes at 1:30 am GMT (July 21)
RBA Governor Lowe Speech at 2:30 am GMT (July 21)
New Zealand Credit Card spending at 3:30 am GMT (July 21)
What to Watch: AUD/USD
On the one hour chart above, we can see AUD/USD retesting strong resistance just above the 0.7000 major psychological handle with a little bit of momentum today. That could be a reaction to the very position COVID-19 vaccine news from the Oxford-Astrazeneca team, but it’s a bit tough to tell with risk sentiment mixed and not major news from the U.S. or Australia on the session.
But the strength is something to watch, especially ahead of potential catalysts from Australia in the upcoming Asia session, in the form of the RBA meeting minutes and a speech from RBA Governor Lowe. The thing to watch out for is if the RBA is concerned about the prospect of another lockdown in Australia and any outlook on stimulative action that may come from it.
If we see little concern from the RBA of a further deep downturn in the economy, the Aussie could have legs to break out higher against the majors. If AUD/USD can sustain above the 0.7000 handle, then it’s likely to draw in buyers who may shoot for the June and July resistance area between 0.7040 – 0.7060.
If we see the RBA increase their worries of another lockdown and potential economic slowdown, traders will likely price in the potential for more stimulative action, and if the leads to a break in the rising ‘lows’ pattern on the chart above, more traders could jump on that signal and create a momentum move lower. This of course assumes a continued mixed risk sentiment picture on the session, and is dependent on how fearful the RBA’s outlook is. If this scenario plays out, then traders could go for the June and July range lows around 0.6930, well within reach given the daily ATR range of around 65 – 70 pips.