AUD/USD hits the top of the watchlist today ahead of top tier data from Australia. Will recent consolidation lead to a breakout?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on the uptrend in NZD/USD, so be sure to check that out to see if there is still a potential play!
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
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DAX: 12818.21 -0.16% FTSE: 6126.38 +0.35% S&P 500: 3230.90 -0.26% DJIA: 26432.26 -0.57% |
US 10-YR: 0.584 % -0.025 Bund 10-YR: -0.515% +0.009 UK 10-YR: 0.101% -0.025 JPN 10-YR: 0.023% +0.003 |
Oil: 41.24 -0.87% Gold: 1,941.40 +0.53% Bitcoin: 11,158.29 +1.51% Ethereum: 319.53 -1.27% |
Fresh Market Headlines & Economic Data:
Dow futures drop more than 100 points as McDonald’s falls, GOP unveils coronavirus relief plan
The Fed is extending its lending programs until the end of the year
US Home prices rose at a slower rate in May, according to S&P Case-Shiller
The Richmond Fed manufacturing index rose from 0 in June to 10 in July
Oil falls as U.S. fiscal package faces tough talks
Spain jobless level hits 15.3% in second quarter
European Central Bank extends bank ban on dividends and stock buybacks
U.K. Retail sales stabilise but non-essential retailers continue to struggle – CBI
Upcoming Potential Catalysts on the Economic Calendar for U.S. & Asia:
API Crude Oil Stock Change at 8:30 pm GMT
U.K. BRC Shop Price Index at 11:00 pm GMT
Australia Inflation Rate at 1:30 am GMT (July 29)
Bank of Japan Amamiya speech at 5:30 am GMT (July 29)
What to Watch: AUD/USD
On the one hour chart of AUD/USD, we can see that the pair has kinda gone no where for the past week, trading between 0.7070 – 0.7175. This indecisiveness may be stemming from the recent negative bias on the Greenback vs. rising global risk aversion sentiment as COVID-19 cases spiked higher, including in Australia.
But that consolidation could break with the latest Australian inflation update on the way. Expectations are for a -2.1% q/q read, far below the previous read of 0.3%, which could cause traders to shift their outlook on monetary policy stimulus measures if inflation is expected to decline rapidly.
For the bulls, the trend is currently on your side, and if the AU CPI number comes out better-then-expected, look for a break above the minor resistance area (0.7175) and for sustained trading above that level before considering long positions.
Also watch out for a pullback ahead of the event as traders may price in the negative expectations before hand. If so, bullish reversal patterns around the minor consolidation area around 0.7070 could draw in buyers if the number comes in better-than-expected.
For the bears, a much weaker-than-expected AU CPI number will likely draw in traders who may price in more stimulus efforts from the RBA, and a break below the rising ‘highs’ pattern is the signal to watch before considering a short position. A break below that area with a round of strong global risk aversion sentiment could take the pair down to the major psychological level of 0.7000.
But if broad risk sentiment remains steady, the previous swing low down to the minor psychological level of 0.7050 is a more realistic target given the daily ATR of around 70 pips.