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Welcome to the first trading day of 2021! And with the risk vibes slightly leaning negative at the moment, we’re spotting a potential short-term uptrend pullback setup on AUD/USD.

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Fresh Market Headlines & Economic Data:

Dow touches record to start 2021, then falls 300 points

Oil eases after hitting multi-month high before OPEC+ meeting

Bitcoin falls as record-breaking rally loses steam

Smaller cryptocurrencies are surging after bitcoin’s wild rally took it past $34,000

Operating conditions in the U.S. improve at fastest pace since September 2014

Record improvement in Canadian business conditions during December

Eurozone manufacturing growth accelerates in final month of 2020

German manufacturing sector ends 2020 with further strong growth, but supply chain pressures build

Brexit-buying’ and port issues lead to stockpiling and supply-chain disruption at UK manufacturers

UK mortgage approvals at highest level in 13 years

Australia PMI holds closet to three-year high despite shipping delays

Germany to extend curbs amid criticism over vaccine rollout

Scotland orders new lockdown as virus spread accelerates

Upcoming Potential Catalysts on the Economic Calendar

Fed Mester speech at 5:15 pm GMT
ECB Lane speech at 8:45 pm GMT
Fed Mester speech at 11:00 pm GMT
Japan Monetary supply at 11:50 pm GMT
U.S Vehicle sales at 12:00 am GMT (Jan. 5)
Australia Job Ads at 12:30 am GMT (Jan. 5)

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 taking a step back from an longer-term uptrend after a double top formation over the last couple of sessions around the 0.7740 area.

This pull back doesn’t seem to be off of any major catalysts, so it may be more technical in nature. If that’s the case, the dip lower may be seen as a buying opportunity for traders if no new catalysts come out to re-shape longer-term sentiment.

If that scenario plays out and the pair dips back to the rising ‘lows’ pattern and the Fibonacci retracement area, look out for bullish reversal patterns around the 68% – 50% Fib retracement area.

And if stochastic is fully indicating oversold conditions, that may be more convincing for risk-on traders to get a bit more bullish.

Of course, if we do see downside momentum pick up, with or without a catalyst as this move could be on positioning/technicals, then watch out for a break below the rising ‘lows’ pattern before considering a short position.

This setup especially makes sense if we do see negative catalysts (e.g., rising geopolitical tensions between U.S. and Iran, more updates of slow vaccine rollouts, continued extension of lockdown protocols).