Daily U.S. Session Watchlist: EUR/AUD

With risk taking back on and ahead of potential catalysts from Australia and China, the bounce off of resistance on EUR/AUD is one to watch for moves on the session.

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

Fresh Market Headlines & Economic Data:

S&P 500 scales new high on upbeat corporate earnings

The Richmond Fed manufacturing activity index fell from 19 in December to 14 in January but remained in expansionary territory

S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Climbed to 9.5% in November

FHFA House Price Index Up 1.0 Percent in November; Up 11.0 Percent from Last Year

UK unemployment reaches four-year high in Covid-19 lockdown

UK Retail sales volumes fell in the year to January, having been broadly stable in December, according to the latest monthly CBI Distributive Trades Survey.

Japan Services PPI for Dec. 2020: -0.4% m/m to 104.6

Bank of Japan Core CPI in Dec. 2020: -0.3% m/m

Japan likely to extend COVID-19 state of emergency

Upcoming Potential Catalysts on the Economic Calendar

API Crude Oil stock change at 9:30 pm GMT
Australia Business Confidence, Inflation Rate at 12:30 am GMT (Jan. 27)
China Industrial Profits at 1:30 am GMT (Jan. 27)

What to Watch: EUR/AUD

On the one-hour chart above of EUR/AUD, we can see traders have respected the strong resistance area around 1.5750 – 1.5800, now taking the pair lower on a quick rising Aussie move.  It looks like a move based on broad risk sentiment, which is leaning positive on the session with no apparent direct catalysts.

This move is likely to draw in more sellers on EUR/AUD short-term, and if the upcoming Australian inflation data comes in above expectations (Markets expect quarterly prices to dip to a 0.8% increase, with annualized prices inching up by 0.8%), it’s likely to fuel the Aussie’s rally even further through the Asia session.

For conservative bears on the pair, it makes sense to wait for a bounce up to the strong resistance area before considering a short position, and for the more aggressive bears, scaling into a short position makes sense to improve odds of success and potential return-on-risk.

For bulls on EUR/AUD, the odds aren’t currently in your favor, and won’t be until broad risk sentiment shifts back to negative and/or that upcoming Australian quarterly CPI number severely disappoints.

If that scenario plays out and EUR/AUD is retesting support around 1.5600 at that time, then watch out for bullish reversal patterns before considering a long, counter trend position on the pair.