It could be a big week for AUD/USD traders as we’ll get top tier catalysts from both the U.S. and Australia. Will we finally see a break above the longer-term consolidation?
AUD/USD Consolidation Break?
We’ve got top tier economic events ahead that could be big catalysts for both the Aussie and U.S. dollar this week.
First, we’ve got the quarterly CPI read from Australia on April 28th, which would likely influence speculation biases on the RBA’s monetary policy outlook. Expectations are for consumer inflation to have ticked up in the first quarter in 2021, which could have traders leaning towards pricing in policy tightening sooner if we see a number well above the 1.0% forecast.
Second, the latest monetary policy statement from the Federal Reserve is up on the 28th as well as a potential mover for the Greenback. There are expectations that the FOMC will refrain from any policy moves, so, it’s likely any change to the Fed’s outlook on the economic recovery would be the catalyst for a Dollar move.
With U.S. economic data showing signs of improvement and the covid situation stabilizing (e.g., daily vaccination rate above 2M, the rate of new covid cases remains relatively stable), it’s likely we’ll continue to hear optimism from the Fed, with a continued hint of cautiousness as employment weakness remains.
Given the potential scenarios above, it’s possibly that we may see a spike higher in AUD/USD this, which could mean the pair would break above the major resistance area around the 0.7800 handle. If so, that could be the start of a new leg higher in AUD/USD on the longer-term timeframes, especially if we get no hints from the Fed that they will tighten policy any time soon.
A break higher could draw both fundamental and technical traders, turning the break into a momentum move, especially if global risk sentiment leans positive this week.
Consider a longer-term long position if that scenario plays out, with potential entry strategies of buying on the break, or waiting for a break-and-retest play if we see the pair fall after a break to the 0.7800 handle and bullish reversal patterns form.
Also consider a potential long position at the bottom of the range if for some reason the market is pushed lower to the 0.7600 area, and the fundamental stories do not change. That may be a buying opportunity to play the longer-term bullish trend in AUD/USD.
What do you guys think? Will AUD/USD break consolidation this week? Or is a retest and hold of the bottom of the range in the cards?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.