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AUD/USD seems to be running into resistance ahead of Fed speak and a potential catalyst from Australia. Will this bring in enough volatility for a reversal or break higher?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at a technical play on USD/JPY, so be sure to check that out to see if there is still a potential play!

Equity Markets Bond Yields Commodities & Crypto
DAX: 13938.55 -0.52%
FTSE: 6514.74 -0.26%
S&P 500: 3900.76 -0.27%
NASDAQ: 13904.27 -0.74%
US 10-YR: 1.14% -0.016
Bund 10-YR: -0.44% +0.008
UK 10-YR: 0.479% +0.015
JPN 10-YR: 0.078% +0.015
Oil: 58.47 +0.19%
Gold: 1,836.00 -0.08%
Bitcoin: 44,346.19 -4.59%
Ethereum: 1,708.91 -4.05%

Fresh Market Headlines & Economic Data:

Stocks erase earlier gains and turn lower amid weakness in Big Tech

U.S. consumer prices increase steadily in January

U.S. wholesale sales in Dec. 2020 was $503.8B (+1.2% m/m) vs. +1.7% in Nov. 2020; Inventories was up 0.3% m/m

U.S. mortgage applications down as rates tick up, industry report says

In December 2020, French manufacturing output decreased −1.7% vs. +0.7% in November

German Inflation rate at +1.0% y/y in January 2021; +0.8% m/m

Europe will need fiscal help into 2022: Lagarde

Brexit threatens to spoil U.K. hospitality’s post-covid recovery

Upcoming Potential Catalysts on the Economic Calendar

Fed Chair Powell speech at 7:00 pm GMT
U.S. Budget statement at 7:00 pm GMT
Australia Consumer inflation expectations at 12:00 am GMT (Feb. 11)

What to Watch: AUD/USD

AUD/USD 1-Hour Forex Chart
AUD/USD 1-Hour Forex Chart

On the one hour chart of AUD/USD above, we can see the pair bounced quickly from last week’s downtrend, already testing the major resistance area between 0.7750 – 0.7800 through out January. The obvious question now is whether that will hold, break or draw in enough sellers to take the pair down lower.

We’ve got commentary ahead from Fed Chair Powell that could be the spark for both volatility and direction. It’s likely we’re not going to hear any surprise revelations on monetary policy, so the odds are pretty low of a volatility spike, but as always with any time the Fed Chair speaks, we’ve gotta be on our toes.

So, unless we do get a surprise from Powell later today, we expect choppy price action on AUD/USD at these levels. This would likely be a perfect time to scale into a position for either directional bias, inputting orders in between the 0.7750 – 0.7800 handle.

If you’re bearish on AUD/USD, this may be a time to start scaling in short, into the strength of the Aussie’s rally this week as profit taking may occur ahead of the week. Or if you are more conservative, wait for another retest of the 0.7750 handle.

If you’re bullish on AUD/USD, the only clear setup at the moment is if the market breaks above the 0.7800 handle, a possibility if we see a combination of dovish comments from Fed Powell on the U.S. economic outlook and positive Australian consumer inflation expectations.

Or if the market does drop from these levels, look out for bullish reversal patterns around the previous area of strong interest, around 0.7700 major psychological level down to the 0.7680 level.