Today we’re checking out the bearish momentum in the Kiwi through AUD/NZD, we could see more volatility with Australian and Chinese data ahead.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/NZD ahead of the latest ECB policy meeting minutes, 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:
Trump claims stimulus talks are back on, two days after he shut them down
Initial U.S. weekly jobless claims: 840,000 last week, higher than the 825,000 Wall Street estimate
Dow rises more than 100 points amid coronavirus stimulus hopes
Strict COVID-19 lockdowns may speed up economic recovery: IMF
Trump pulls out of virtual debate with Biden, calls it ‘waste’ of time
Canada housing starts was 214K in September vs. 212K in August – CMHC
Bank of Canada head says pandemic response will boost risks from future economic shocks
Bank of England’s Bailey ready to use policy firepower, sees downside risks
Bank of England warns that full Brexit could be bumpy for investors
German exports were up +2.4% m/m in August 2020
EU’s Michel says Brexit talks facing moment of truth
Bank of England Financial Policy Summary and Record – October 2020
Upcoming Potential Catalysts on the Economic Calendar
Fed Barkin speech at 6:30 pm GMT
Fed Kaplan speech at 10:00 pm GMT
Japan Household Spending & Avg. Cash Earnings at 11:30 pm GMT
RBA Financial Stability Review, Home Loans at 12:30 am GMT (Oct. 9)
China Caixin Services PMI at 1:45 am GMT (Oct. 9)
Japan Machine Tool Orders at 6:00 am GMT (Oct. 9)
What to Watch: AUD/NZD
On the one-hour chart above of AUD/NZD, we can see upside momentum picked up over the last two sessions, likely on renewed speculation that the Reserve Bank of New Zealand may increase stimulus measures, including the possibility of negative interest rates.
This brought enough strength in the rally to break above the minor resistance area between 1.0820 – 1.0850, which could draw in fresh buyers in the medium to longer-term if the current negative rates speculation persists and all other things being equal.
But we’re seeing a bearish price pattern form on the chart above in the form of bearish divergence, so we could get a short-term pullback, especially if the upcoming scheduled events from Australia and China spark a bearish reaction.
So for the next session or two, we’re watching for that pullback to retest the broken resistance area around 1.0850. And if the Australian and Chinese data do not disappoint, coupled with an emergence of a bullish reversal pattern from 1.0850 down to 1.0800, then a long position makes sense for a short-term to swing position play.
But if we see disappointing data from Australia and/or China, AND we get surprise comments from RBNZ officials walking back negative interest rate talk, then this move could flip back to the downside, which would likely draw in sellers if the if the market gets below that 1.0820 strong area of interest.