AUD/USD could see a lot of action this week with top tier catalysts coming from both the U.S. and Australia. Could it push the pair out of consolidation?
AUD/USD Consolidation Break?
AUD/USD has been on a solid run higher thanks to the overall bearish attitude on the U.S. dollar going back to the beginning of the coronavirus pandemic. Ever since the U.S. government and Federal Reserve unleashed their massive stimulus moves to support the U.S. economy, traders have shunned low risk assets and safe havens like the U.S. dollar for riskier assets.
That brought AUD/USD from a low of around 0.5500 to its current trading range around the 0.7700 handle, and in recent weeks, it looks like the pair has truly been in a range as it bounces between 0.7670 – 0.7800.
That range may be about to break, though, with the upcoming FOMC Statement and U.S. GDP update ready to potential shake up the Greenback. And from Australia, the quarterly CPI number has the potential to get the Aussie shaking this week.
With the Fed likely to hold monetary policy as-is, and Australia CPI rate expected to slow, my though is that we could see a downside move this week in AUD/USD, which I think could be an opportunity to play the longer-term trend higher.
If that scenario plays out, I’ll be on the lookout for bullish reversal patterns around the strong support area at 0.7660 to start a potential long position. Of course, if the pair pops higher and breaks above the falling ‘highs’ pattern, I may start a brand new long position there as well.
If the Fed signals a potential pullback in quantitative easing, or signals that inflation is rising faster than expected, that may draw a bullish reaction in the Greenback from the financial markets that could potentially be a swing to longer-term setup. I’ll likely stay out of AUD/USD in that scenario and see how the markets react or re-adjust my trading plan.
And if the Australian CPI data truly disappoints, that could mean a momentum move to the downside as longer-term players may take profits.
What do you guys think? Is AUD/USD going to break from consolidation and resume the uptrend? Or will it be a downside break?
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.
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