The Aussie is on a tear higher so we’re going to see if trying to catch the momentum in AUD/USD makes sense for a short-term trade.
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German Production in December 2020: 0.0% m/m; -1.0% y/y
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Upcoming Potential Catalysts on the Economic Calendar
Fed Mester speech at 5:00 pm GMT
Japan Average cash earnings at 11:30 pm GMT
Japan Money supply at 11:50 pm GMT
Australia Business confidence at 12:30 am GMT (Feb. 9)
Japan Machine tool orders at 6:00 am GMT (Feb. 9)
What to Watch: AUD/USD
On the one hour chart above, we can see AUD/USD breaking above a previous area of interest, likely on the continued positive risk sentiment driven by the vaccine rollout and recovery/stimulus themes. The question now is whether this is a fakeout or breakout?
Of course we won’t know until we get there, but with Australian business confidence data ahead and the recovery/stimulus theme still going strong, the odds are that the upside bias has legs.
For those who are in the AUD/USD bull camp, then it makes sense to buy the upside break with a tight stop just on the other side of the other side of the strong level of interest (around 0.7680) to create a solid potential return-on-risk.
For those who are a little more conservative, you may want to wait for a pullback to that level before going in long for either a short-term or swing position.
For the bears who believes this is a fakeout and we’ll likely see a bearish catalyst (e.g., negative shift in global risk sentiment, very disappointing Australian business confidence data), then selling at current levels up to the previous swing high (around 0.7780) makes sense.
This actually plays along with the longer-term trend lower going back to the beginning of the year when AUD/USD topped out at around 0.7825.