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Broad risk-on sentiment seems to be the theme of the U.S. session after news of the U.S. lawmakers give hope of a stimulus deal soon, as well as better-than-expected U.S. economic updates. This sparked a sell-off in the Greenback, but will momentum last for the rest of the session?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/CHF ahead of the latest GDP data from the U.K., so be sure to check that out to see if there is still a potential play!

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Fresh Market Headlines & Economic Data:

U.S. companies added better than expected 749,000 jobs amid jump in construction, hospitality, ADP says

Chicago Business Barometer – Surges to 62.4 in September

US Mortgage applications decreased 4.8% from one week earlier

U.S. economy plunges 31.4% in the second quarter but a big rebound is expected

U.S. pending home sales race to record high in August

Dow rises 250 points as Mnuchin says lawmakers will give stimulus a ‘serious try’

Real Canadian gross domestic product (GDP) grew 3.0% in July, following a 6.5% increase in June.

ECB to Consider Inflation Overshoot in Echo of Fed Strategy

UK GDP collapsed nearly 20% in second quarter in historic COVID hit

Haldane joins BOE pushback on negative interest-rate speculation

German employment up 0.0% m/m in August 2020

German Retail turnover in August 2020: 3.1% m/m

French consumer spending climbs in August as shoppers splurge in sales

Italian CPI in September 2020: -0.6% m/m, -0.5% y/y

Upcoming Potential Catalysts on the Economic Calendar

Fed Kaplan speech at 10:00 pm GMT
Australia Ai Group Manufacturing Index at 10:30 pm GMT
Australia Markit Manufacturing PMI at 11:00 pm GMT
Japan Tankan Business surveys at 11:50 pm GMT
Japan Jibun Bank Manufacturing PMI at 12:30 am GMT (Oct. 1)

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 that spike higher in the last hour, mainly driven by broad risk sentiment sparked by comments from U.S. officials on a potential stimulus bill, and on better-than-expected U.S. economic data.

This move was enough to break above the previous session high at 0.7150, now taking the bulls to the next potential resistance area around 0.7200 – 0.7230 (previous consolidation area).

And volatility could stay bid well into the Asia trading session with the latest business sentiment data from Australia if we see a big surprise from the previous read.

Last month, the AIG manufacturing index number came in at 49.3, indicating contractionary conditions, so if there is a positive surprise, that could keep the rally in AUD/USD going.

For AUD/USD bulls, that’s the scenario to look out for if considering a fresh long position, and if that plays out, a retest of the 0.7150 handle is the most likely area to draw in buyers.

But with a daily ATR of around 70 pips, it’s probably a good idea to be open to the possibility of a retest all the way down to the 0.7100 handle if there is a pullback.

For AUD/USD bears, you’ll need to see a shift in broad risk sentiment back to negative and the Aussie business sentiment data to disappoint before a short position makes sense.

If that scenario plays out, watch out for a break below the rising ‘lows’ pattern, which should occur right around the 0.7120 area. Technical traders may take that as a cue to short the currency pair, and likely target the September lows just above the 0.7000 for a swing type trade.