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There’s a chance that volatility could pick up quickly for the Aussie dollar as we’ll get the latest monetary policy statement from the RBA very soon.

Will they cut or save it for another meeting down the road? And will that contribute to today’s bounce in EUR/AUD

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Fresh Market Headlines & Economic Data:

Dow rises 300 points on optimism about Trump’s health and a new stimulus deal

Trump’s COVID-19 status unclear, could return to White House Monday

Oil rebounds on Trump health update, Norway shutdowns

U.S. service sector activity rises above pre-pandemic level in September: ISM survey

Consumer Sentiment in Canada Stalls; 51% Say Economy Will Weaken

Service sector weighs on eurozone economy in September

Volume of retail trade up by 4.4% in euro area; Up by 3.8% in EU

EU current account surplus €82.9B; €24.8B surplus for trade in services

Euro zone investor morale deteriorates in October, Sentix says

Expansion of U.K. service sector remains marked in September

Australian services activity returns to growth at end of
third quarter

NAB Business Confidence for September: +6 to 0 index points

ANZ Bank’s commodity price index for last month was fractionally lower at -0.2%

Japanese Business activity decreases at slowest rate in
eight months

Upcoming Potential Catalysts on the Economic Calendar

Fed Bostic speech at 7:15 pm GMT
Australia Construction Index at 9:30 pm GMT
Australia Trade Balance, Job Ads at 12:30 am GMT (Oct. 6)
RBA Interest Rate Decision at 3:30 am GMT (Oct. 6)

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 the currency pair finding buying support at the start of the new week, likely on the round of better-than-expected economic updates from the euro area, including better-than-expected services PMI data and euro area retail sales numbers.

This support area lines up with the strong area of interest between 1.6300 – 1.6350, which served as resistance through September, so technical traders could be using it as support, which seems to be the case at the moment.

So, the odds seem to be in EUR/AUD bulls favor at the moment, and the catalyst for a potential continued move to the upside may come very soon.

We’re talking about the latest monetary policy decision from the Reserve Bank of Australia (Oct 6, 3:30 am GMT), and while expectations are for no changes to policy at this time, there’s always the possibility of a surprise.

If so, and it’s a dovish one (i.e., surprise rate cut / increase in stimulus measures), then the Aussie could sell off quickly and take EUR/AUD back up to the strong area of interest / major psychological handle of 1.6500. Given the daily ATR range of around 100 pips, this could happen within the session, or maybe in two.

For the bears on EUR/AUD, any signals that the RBA will not ease monetary conditions in this meeting or the next, we could see a spike higher in the Aussie, and easily see a break below the support area around 1.6300. If this scenario plays out, then consider a potential short position if we see bearish continuation patterns at or below the 1.6300 handle.

Even better from a potential R:R perspective, if EUR/AUD is testing the 1.6400 – 1.6450 area before the event and this scenario plays out, you can create a position at much better prices and go for a swing position for a bigger potential reward as this would likely propel the Aussie higher for the week if we don’t see any further headline surprises.