Daily U.S. Session Watchlist: AUD/USD

Volatility is likely to pick up very soon for the Greenback with the FOMC statement ahead, and when combined with upcoming Australia employment updates, the consolidation pattern in AUD/USD is definitely one to watch.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/JPY ahead of eurozone PMI data, so be sure to check that out to see if there is still a potential play!

Fresh Market Headlines & Economic Data:

Stocks slip as traders weigh stimulus talks and weak retail sales

Bitcoin breaks above $20,000 for first time

U.S. Treasury labels Switzerland, Vietnam as currency manipulators

Congress closes in on a $900 billion Covid relief deal as Americans await aid

U.S. business activity cools in mid-December amid COVID-19 resurgence -IHS Markit

U.S. retail sales tumble in sign economic rebound is sputtering

U.S. Homebuilder confidence drops from record high as rising prices hit buyers

Canada Wholesale Trade Rises 1.0% in October

Inflation in Canada breaks past pandemic levels on housing costs

Eurozone economy close to stabilizing as Flash PMI rises to 49.8

German economy shows ongoing resilience in December

Softer contraction in French private sector activity during December

Fish could still sink Brexit deal, says EU’s Ursula von der Leyen

Euro area international trade in goods surplus €30.0 bn; €28.1 bn surplus for EU

UK CPI was 0.6% in November 2020, down from 0.9% in October 2020; The 12-month rate was 0.3% in November 2020, down from 0.7% in October.

Rising U.K. House Prices Drive Mortgage Surge for Banks

EU chief says UK trade pact closer but success not certain

Upcoming Potential Catalysts on the Economic Calendar

ECB Schnabel speech at 4:15 pm GMT
Bundesbank Weidmann speech at 5:00 pm GMT
FOMC Monetary policy statement at 7:00 pm GMT
Fed Press Conference at 7:30 pm GMT
Australia New Home sales at 12:00 am GMT (Dec. 17)
Australia Employment Update at 12:30 am GMT (Dec. 17)

What to Watch: AUD/USD

On the one hour chart above of AUD/USD, we can see that the pair has been trading sideways this past week, likely on traders sitting tight as they await a new stimulus package from the U.S. government. But volatility could pop in a heartbeat this afternoon as we’ll get the latest monetary policy decision from the Federal Reserve.

Expectations for the event are for the FOMC to make no changes to policy this month and rhetoric that more bond buying may come, so any scenario outside of that could spark action quickly in the Greenback. This could lead to a break in the consolidation pattern in AUD/USD above. 

Another scenario to consider is if the FOMC event plays out as expected, that could draw in more bulls into AUD/USD as traders continue to price in expectations of more Dollar weakness as the Fed keeps interest rates low for years to come.

The odds rise of an upside breakout in AUD/USD if we see Australia print an employment update better than expectations of 60K net job ads and the unemployment rate coming at 7.0% or lower.

Now if the FOMC doesn’t hint at more bond buying and the Australian data disappoints, we could see AUD/USD break to the downside. But that’s a low probability event and one that may not catch strong legs to the downside given the high expectations of a recovery ahead with coronavirus vaccine beginning its distribution around the world.