Aussie dollar/USD: Market fireworks coming before Independence Day

U.S. traders are already counting the hours to a long weekend of barbecues, boats, and fireworks on Friday’s Independence Day holiday. However, the market will be erupting with its own fireworks throughout this data-filled week.

Of course, the action-packed finale of the fireworks show will consist of Thursday’s ECB meeting and Non-Farm Payroll report. My colleague Kathleen Brooks already discussed Four Problems Facing the ECB earlier today, and we will publish a thorough NFP preview on Wednesday, as well as our free NFP Prep webinar.

Prior to that, markets will get a look at major economic data from all corners of the world, including a glut of high-impact reports out of Australia. Most prominently, the RBA will release its monetary policy decision and statement in about 12 hours.

The central bank will almost certainly leave interest rates unchanged despite the recent improvement in Chinese economic data, so comments about the exchange rate could be the primary driver of volatility. If the statement adopts a harsher tone about the rising value of the Aussie, rates may pull back from here, but if the central bank fails to take this step, traders may see that as a green light to drive the AUD/USD to new 2014 highs above .9460.
 

Technical View: AUD/USD
 

Speaking of technical levels, the AUD/USD is still consolidating near the top of its recent .9200-.9460 range. The pair is still holding above a short-term bullish trend line off its late May low, but the pair has essentially lost all momentum since the initial run to .9440 three weeks ago. Meanwhile, the RSI indicator has already broken below its corresponding bullish trend line, raising the likelihood of a breakdown in price itself.
 


Source: FOREX.com
 

For now, bulls will be cautious about entering any new positions unless rates can close above the YTD high at .9460. Indeed, the technical signs are showing that the risk of a downside break are growing; if we see the pair drop through its bullish trend line support, a continuation down toward the 50-day MA near .9325 would be favored next.

Regardless, U,.S. traders should be sure to stay focused this week and keep their minds from wondering to the weekend’s excitement too early.
 

Key Economic Data / News that May Impact AUD/USD (all times GMT)
 

  • Monday: U.S. Chicago PMI (13:45), U.S. Pending Home Sales (14:00)
  • Tuesday: Chinese Official Manufacturing PMI (1:00), Chinese Final HSBC Manufacturing PMI (1:45), RBA Interest Rate Decision and Statement (4:30), US ISM Manufacturing PMI (14:00)
  • Wednesday: AU Trade Balance (1:30), US ADP Employment Report (12:15), Fed Chair Yellen Speech (15:00)
  • Thursday: RBA Governor Stevens Speech (1:00), Chinese Services PMI (1:00), AU Retail Sales and Building Approvals (1:30), Chinese HSBC Services PMI (1:45), U.S. Non-Farm Payroll Report (12:30), U.S. ISM Non-Manufacturing PMI (14:00)
  • Friday: No major data scheduled
About the Author
Matt Weller

Senior Technical Analyst for FOREX.com. Matt has actively traded various financial instruments including stocks, options, and forex since 2005. Each day, Matt creates research reports focusing on technical analysis of the forex, equity, and commodity markets. In his research, he utilizes candlestick patterns, classic technical indicators, and Fibonacci analysis to predict market moves. Matt is a Chartered Market Technician (CMT) and a member of the Market Technicians Association. You can reach Matt directly via e-mail (mweller@gaincapital.com) or on twitter (@MWellerFX).

Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome