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EUR/AUD has been in a solid short-term downtrend and with Aussie jobs just ahead, we’ve got potential setups for both the bulls and the bears.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD ahead of U.K. inflation data, 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:

Dow slips from a record in volatile trading even after a surprise jump in retail sales

Saudi Arabia Set to Raise Oil Output Amid Recovery in Prices

U.S. Retail sales burst higher in January as consumers use stimulus checks to spend heavily

U.S. producer prices post biggest gain since 2009

U.S. homebuilder confidence improves, despite record high lumber prices

U.S. industrial output jumps 0.9% in January for fourth straight gain

Canada CPI accelerates in January to 1.0% y/y
vs. 0.7% y/y in December

U.K. consumer price inflation was +0.7% in January vs. +0.6% in December

Average UK house price surges by 8.5% to hit record high in December

Upcoming Potential Catalysts on the Economic Calendar

FOMC Minutes at 7:00 pm GMT
API Crude oil stock change at 9:30 pm GMT
Fed Kaplan speech at 11:05 pm GMT
Australia Employment at 12:30 am GMT (Feb. 18)

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 a simple downtrend on the pair going back to the beginning of February. Broad risk sentient has been the likely driver as the recovery / stimulus themes have likely been driving traders towards risk-on assets and away from low-yielding/safe haven assets.

Now that we’re seeing covid vaccines being distributed and new cases decelerating across the globe, it’s likely this theme will continue to be the main driver for EUR/AUD downward bias.

In the short-term , we’re getting the latest employment situation update from Australia in the upcoming Asia trading session. Expectations are for another round of improvements to the data (Markets see another 30,000 net job additions in January,  jobless rate could ease further to 6.5%), which could mean more gains for the Aussie in the short-term.

If you’re bearish EUR/AUD on expectations of a positive reaction to positive Aussie jobs data, watch out for a break below the minor support we’re currently seeing around the 1.5550 handle. This could draw in momentum sellers and push the pair lower quickly, especially if broad risk sentiment is still leaning positive at the time.

For the more conservative, you could wait for a retest of the falling ‘highs’ pattern / previous area of interest (around the 1.5630 handle) before considering a short position. Bearish reversal patterns there would likely draw in sellers to play the trend lower if Aussie data continues to improve.

For the bulls on EUR/AUD, a surprisingly bearish report on Aussie jobs and a shift in global risk sentiment is likely needed for a sustained move to the upside. In that scenario, a break above the falling trendline may draw in buyers, likely fresh longs if the data is bad enough, or at least some profit takers who have been riding the trend lower over the past few weeks.