A risk-friendly trading environment boosted AUD/USD higher today.
Can the bulls sustain the momentum long enough to stage a short-term trend reversal?
Before moving on, ICYMI, today’s Asia-London session watchlist looked at GBP/AUD reflecting an Aussie rally ahead of the RBA’s policy decision. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
AIG index: Australia’s services broadly stable in November
Japan’s avg cash earnings up 0.2% in Oct (vs. 0.7% expected, 0.2% in Sept)
Japan’s household spending dips for a 3rd straight month in Oct due to COVID drag
U.K. retail sales rose in November, boosted by discounts on clothing
China trade: export growth slowed in November, but imports surged
RBA keeps rates unchanged as expected in December, will discuss QE program in February
China central bank cuts rates on relending facility but benchmark cut chances seen low
Bitcoin back over $50,000, as market calms after weekend turmoil
Oil prices climb on easing Omicron fears, Iran delay
German industrial production up by 2.8% in Oct. after 1.1% dip in Sept.
Upcoming Potential Catalysts on the Forex Economic Calendar:
Eurozone’s ZEW economic sentiment at 10:00 am GMT
Germany’s ZEW economic sentiment at 10:00 am GMT
Eurozone’s revised GDP at 10:00 am GMT
Canada’s trade balance at 1:30 pm GMT
Canada’s IVEY PMI at 3:00 pm GMT
If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.
What to Watch: AUD/USD
Risk-taking was the name of the game during the Asian session after traders took a chill pill from being concerned about the Omicron COVID-19 variant.
It also helped that the People’s Bank of China (PBoC) just slashed its reserve requirements to help its economy.
In the Aussie’s case, all the risk-taking piled on top of the Reserve Bank of Australia’s (RBA) decision to keep its rates steady in December.See, the central bank’s texts also reflected its confidence that the economy will go back to its pre-Delta trajectory in H1 2022 as well as its plans to talk (probably reducing its) QE program as early as February.
AUD/USD is now 36 pips higher from its daily open price, a bit more than half its daily average volatility.
I’ll be watching the .7100 levels closely as it hangs around the 1-hour chart’s 200 SMA, a trend line resistance, and the 61.8% Fib retracement of the last downswing.
There aren’t a lot of top-tier reports scheduled today so it’s possible that we’ll see more risk-taking in the next few hours.
If risk appetite pushes AUD/USD above .7000 and the trend line resistance, then the bulls could have enough momentum to reach December’s highs near .7150.
If AUD/USD traders take profits from the intraday upswing, however, or if USD traders focus on the Fed’s shorter taper/tightening timeline relative to the RBA, then AUD/USD could get rejected at the trend line and drop back down to last week’s lows.