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Today, we’re checking out AUD/USD ahead of the potential volatility coming for the Aussie from the upcoming Reserve Bank of Australia’s latest monetary policy statement.

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Fresh Market Headlines & Economic Data:

Wall Street rebound accelerates as Dow jumps more than 500 points

Oil prices tumble as lockdowns stoke recession fears

IHS Markit U.S. Manufacturing PMI improved slightly to 53.4 in October from 53.2 in September

ISM Manufacturing PMI improved in October to 59.3 from 55.4 in September

IHS Markit Eurozone Manufacturing PMI: 54.8 in October vs. 53.7 in September

UK manufacturing upturn continues in October despite further loss of growth momentum

Boris Johnson announces month-long national lockdown of England

Brexit Negotiators Move Close to Breaking Impasse Over Fish

Canada Manufacturing PMI: down slightly in October to 55.5 from 56.0 in September

IHS Markit Australia Manufacturing PMI: 54.2 in October vs. 55.4 in September

Australian job ads rise for sixth month in October

New Zealand building consents was up 3.5% y/y in Sept.

Japan Manufacturing PMI improved to 48.7 in October from 47.7 Sept.

China’s manufacturing sector expands for sixth straight month as pandemic fallout fades, private survey shows

Upcoming Potential Catalysts on the Economic Calendar

U.S. Total Vehicle sales at 12:00 am GMT (Nov.3)
Reserve Bank of Australia Interest Rate Decision at 3:30 am GMT (Nov.3)

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 the pair recently took a tumble, rolling lower with broad risk sentiment as traders shifted to a negative stance on growing pandemic fears last week.

The pair seems to be ranging between the major psychological level of 0.7000 and 0.7060 at the moment, but that could change quickly with the latest monetary policy decision from the Reserve Bank of Australia coming soon.

Expectations are for the RBA to cut the cash rate to 0.10% and give a dovish tone on their economic outlook. This may be baked into the Aussie already, but if this scenario does play out and the Aussie spikes higher, AUD/USD bears may want to watch the 0.7060 -0.7100 area for bearish reversal patterns. This is not only the top of the recent range but also the Fibonacci retracement area of the recent swing move lower.

It’s also one daily ATR move up from the swing lows, and with Stochastic indicating short-term overbought conditions, buyers may run out of steam in this area.

If the RBA surprises with a scenario involving no rate cut and/or an optimistic outlook on the economy, then the Aussie could spike higher.

Look for a break above the current range for a potential long opportunity, and a possible break-and-retest setup around the 0.7060 area as a potential entry signal.

Another bullish setup to considering in the scenario is a retest and bullish reversal patterns at the major psychological area of 0.7000. And this is a great setup to consider if broad risk sentiment continues to lean positively.