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EUR/AUD made strong moves lower on the session thanks to fresh catalysts, but will the upcoming European data be enough to keep the momentum going?

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Fresh Market Headlines & Economic Data:

Powell announces new Fed approach to inflation that could keep rates lower for longer

Abbott wins U.S. authorization for $5 rapid Covid-19 antigen test

Initial U.S. jobless claims totaled just over 1M for the week ending Aug. 22, down from 1.104M in the previous week.

Second-quarter GDP plunged by worst-ever 31.7% as economy went into lockdown

U.S. pending home sales index rose 5.9% to 122.1 last month

Canada’s current account deficit (on a seasonally adjusted basis) narrowed by $4.6B in Q2 to $8.6B.

Annual growth rate of broad monetary aggregate M3 increased to 10.2% in July 2020 from 9.2% in June

French 2020 economic contraction could be less than forecast 11% -Le Maire

French Business Morale Rebounds in August Despite Surging COVID-19 Cases

Switzerland’s GDP fell by -8.2 % in the 2nd quarter of 2020, after decreasing by -2.5 % (revised) in the previous quarter.

Pandemic may push Japan banks’ credit costs to crisis levels: BOJ’s Suzuki

Upcoming Potential Catalysts on the Economic Calendar

Japan Tokyo CPI at 11:30 pm GMT
Fed Barkin speech at 4:30 am GMT (Aug. 28)
German Gfk Consumer climate, Import prices at 6:00 am GMT (Aug. 28)
French Prelim GDP & CPI at 6:45 am GMT (Aug. 28)
Swiss KOF Economic Barometer at 7:00 am GMT (Aug. 28)
Japan PM Shinzo Abe speech at 8:00 am GMT (Aug. 28)
Euro Area Economic & business sentiment, Consumer Confidence at 9:00 am GMT (Aug. 28)
Canada GDP at 12:30 pm GMT (Aug. 28)
U.S. Personal Income & Spending, PCE Price index, Goods trade balance at 12:30 pm GMT (Aug. 28)

What to Watch: EUR/AUD

EUR/AUD 1-Hour Forex Chart
EUR/AUD 1-Hour Forex Chart

On the one-hour chart above of EUR/AUD, we can see strong downside momentum favoring the Aussie for the session. Risk sentiment seems to be leaning positive on the session, especially after Fed Chair Powell’s speech on inflation and jobs earlier in the U.S. session.

That momentum had enough juice for EUR/AUD bears to break below the bottom of the recent range (around 1.6360) that could draw in technical sellers for a continued short-term move lower.

Looking forward, we do have potential catalysts that could keep volatility going for the pair, most notably the upcoming Euro area economic/business/consumer sentiment data, but we also may see reactions off of central bank speeches during the Jackson Hole Economic Symposium going on this week.

For the bears, the ball is currently in your court right now with the downside momentum, and if you have expectations of disappointing Euro area sentiment and/or continued positive global risk sentiment, shorting at current levels up to the broken support level makes sense.

With a daily Average True Range of around 95 – 100 pips, then the next major psycholgoical handle is a target that seems reachable within the next session or two.

For swing traders, shoot for a move to the next major support area around 1.6120 for strong potential return-on-risk if using the ATR as your stop guide.

For the bulls on the pair, it’ll likely take both positive European sentiment data and a broad move in risk sentiment towards negative to turn this pair around.

Bearish commentary from the Reserve Bank of Australia would likely have the same effect as well.

If we do see these scenarios, buying if we see a test of the 1.6200 – 1.6250 area makes sense, but a more prudent approach would be to wait for a break back above the 1.6360 handle as it may draw in technical buyers at that point.