It could be a quiet trading session without any major releases, but earlier catalysts and expectations for upcoming events could still lead to big moves for this pair.

Before moving on, ICYMI, today’s Daily Asia -London Session Watchlist looked at an opportunity forming on EUR/AUD as the pair consolidated, so be sure to check that out to see if there is still a potential play!

Before we talk setups, check out the top headlines in the last few hours:

  • New Zealand manufacturing sales dipped 0.6% in Q4
  • Chinese state funds reportedly intervened to stem market decline
  • Japan downgraded Q4 GDP as companies scaled back spending
  • Japanese average cash earnings declined 0.8% vs. projected 1.6% slump
  • Japanese household spending tumbled 6.1% vs. estimated 2.1% decline
  • Markets price in expectations of $1,400 U.S. stimulus checks in coming weeks
  • New Zealand preliminary ANZ business confidence fell from 7.0 to 0.0
  • U.K. BRC retail sales monitor improved from 7.1% to 9.5%
  • Australia NAB business confidence index up from 12 to 16

Upcoming Potential Catalysts on the Economic Calendar:

  • U.S. NFIB Small Business index at 11:00 am GMT
  • RBA Governor Lowe’s testimony at 10:00 pm GMT
  • Australia’s Westpac consumer sentiment index at 11:30 pm GMT

What to Watch: EUR/AUD

EUR/AUD 1-hour Forex Chart

EUR/AUD 1-hour Forex Chart

EUR/AUD has formed lower highs and higher lows to consolidate inside a somewhat symmetrical triangle on its short-term chart.

The consolidation is getting tighter, which means that buyers and sellers are battling out and that a winner could emerge soon. Technical indicators are giving mixed signals, though, with Stochastic pointing lower and the 100 SMA keeping a slight lead above the 200 SMA.

A break below the triangle bottom around the 1.5450 minor psychological mark could set off a slide that’s at least the same height as the chart pattern, which spans nearly 300 pips.

I’m inclined to think that the euro could be in for more weakness ahead of the ECB decision later on this week, as traders price in verbal intervention among policymakers to keep bond yields in check.

Meanwhile, the Aussie could enjoy some upside on risk-taking now that another round of stimulus would likely be doled out by the Biden administration. Data from the Land Down Under has been mostly upbeat as well.