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We’re checking out the downtrend in EUR/AUD today after a round of disappointing PMI updates from Europe, and ahead of economic updates from Australia.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD as it may pull back from an uptrend, 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:

Georgia on cusp of delivering Senate to Democrats as Warnock wins, Ossoff leads

Dow jumps more than 450 points to fresh record high, Nasdaq flat amid Georgia runoff results

Bitcoin hits new record above $35,000 following massive drop

U.S. Private payrolls post first drop since April as coronavirus spread hits job growth, ADP says

Markit U.S. Services PMI shows growth at slowest for three months amid rise in virus cases

U.S. Mortgage demand from homebuyers pulled back sharply, even as rates ended 2020 near record low

Eurozone private sector contracts again in final month of 2020

German business activity falls for third straight month in December

Industrial producer prices up by 0.4% m/m in both euro area and EU in November 2020

U.K. Service sector activity falls again in December

Upcoming Potential Catalysts on the Economic Calendar

FOMC Meeting Minutes at 7:00 pm GMT
Japan Average Cash Earnings at 11:30 pm GMT
Australia Trade Balance, Building Permits at 12:30 am (Jan. 7)

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 steady downtrend which started at the beginning of December but has picked up speed in recent weeks.

It’s likely the surge in virus cases across Europe and the resulting lockdowns have soured traders on the euro, while the Aussie has likely benefitted from Australia’s relative success in its containment of the pandemic.

And we saw another round of euro selling on the session, likely sparked by the net disappointing round of service PMI updates from the eurozone, which may influence euro sentiment in the short-term along with extended lockdowns in Europe.

The volatility may not stop with the eurozone PMI updates as we’ll get trade and housing updates from Australia in the upcoming Asia session, likely bring a bit more volatility to the pair.

So, if you’re bearish on EUR/AUD, the odds are in your favor, and with the break of the previous swing low at 1.5830 now holding, it may be time to consider a fresh short or adding to your shorts if you’re already in the pair and expect positive Australian updates.

If you’re bullish on EUR/AUD, possibly on expectations of weak Australian updates and/or a shift in broad risk sentiment towards negative, then a break-and-hold above that 1.5830 minor area of interest is the price action to watch out for.

This is a low probability setup at the moment, so be careful if you are considering this play, but the potential reward is pretty strong if we see a round of global risk aversion price action.