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AUD/USD makes it to the top of today’s watchlist as the Greenback is set to see some action with today’s Fed statement just ahead, as well as potential Aussie volatility coming with the latest Australian job numbers right around the corner.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/JPY ahead of the latest UK inflation updates, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 13211.58 -0.05%
FTSE: 6071.09 -0.56%
S&P 500: 3405.62 +0.13%
DJIA: 28066.45 +0.25%
US 10-YR: 0.672% -0.007
Bund 10-YR: -0.489% -0.009
UK 10-YR: 0.213% -0.006
JPN 10-YR: 0.013% +0.001
Oil: 39.58 +3.40%
Gold: 1970.40 +0.21%
Bitcoin: 10878.79 +1.08%
Ethereum: 365.23 +0.45%

Fresh Market Headlines & Economic Data:

U.S. consumer spending appears to slow in August

U.S. Mortgage Applications Decrease in Latest MBA Weekly Survey

U.S. Homebuilder sentiment soars to record high, but lumber prices raise a red flag

Canada’s annual inflation remained at 0.1% in August

Canada’s international transactions in securities generated a net outflow of funds from the Canadian economy of $9.8B in July.

Chances of Brexit deal fading every day, EU Commission chief says

Euro area international trade in goods surplus €27.9 bn; €25.8 bn surplus for EU

UK diner discounts push inflation down to near five-year low

Upcoming Potential Catalysts on the Economic Calendar

FOMC Monetary Policy Statement at 6:00 pm GMT
Federal Reserve Press Conference at 6:30 pm GMT
New Zealand GDP at 10:45 pm GMT
U.S. Net Long-Term Tic Flows at 8:00 pm GMT
Australia Employment change, RBA Bulletin at 1:30 am GMT (Sept. 17)
Bank of Japan Interest Rate decision at 3:00 am GMT (Sept. 17)

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 a steady move higher in the pair after a short-term pullback to the 0.7200 handle. This was a shallow pullback in the grander scheme of things as the pair has been in a longer-term trend higher going way back to the peak of the pandemic fears in March, where we saw AUD/USD bottom out around 0.5500. What a run!

Anyway, this picture could change quickly with the latest FOMC monetary policy statement just a few hours away, and the Australian employment update coming soon in the next Asia trading session.

There’s a lot of ways this could play out, but with current expectations of the Fed holding off on new policy moves (and likely to focus on their new inflation targeting strategy for a while) and the Aussie jobs data to print a net job loss, its likely we’ll see choppy behavior through the next session or two. But we think the pair will still lean to the upside as USD price action will likely dominate currency moves this week.

So, if you’re a bull on AUD/USD, the odds are still in your favor, but definitely sit on the sidelines until we see what the Fed says this afternoon. Besides comments on their new inflation targeting strategy, traders will be on the lookout for any considerations of enacting on yield curve control. This is a very low probability scenario, but if it does happen, it could spark a huge reaction from traders.

Traders will also be on the look out to see how far out the Fed will likely hold a low interest rate outlook, with expectations of holding at zero through 2023. If there’s a hint of rates rising before then, that could draw in some bullish U.S. dollar behavior. In that scenario, a break of the rising lows pattern on AUD/USD could draw in momentum sellers on the pair, especially if the Australian jobs data comes inline or worse-than-expected. Stay frosty traders!