EUR/AUD poised to breakout amidst next week’s AU CPI and ECB meeting
Matt Weller, CFA, CMT July 20, 2018 3:50 PM
The marquee economic events impacting next week’s FX market will likely be Australia’s Q2 CPI reading in Wednesday’s Asian session and Thursday’s ECB meeting. Tackling the inflation report Down Under first, economists are expecting a +0.4% quarter-over-quarter print, in-line with last April’s reading. While the report may have little immediate policy impact, traders are currently pricing in about a 10% chance of a rate hike from the RBA by the end of the year, so a stronger-than-expected reading could boost both that figure and the Aussie itself.
Speaking of little immediate policy impact, next week’s ECB meeting may be less significant than many of the other recent confabs. Since ECB President Mario Draghi dashed hopes of a rate increase in early 2019 last month, the Eurozone has seen a disappointing revision to core inflation and an increase in hawkish trade talk; in other words, the ECB is unlikely to have grown more optimistic over the last six weeks. Be sure to watch for our full coverage of the ECB meeting as we move into the middle of next week!
Technical View: EUR/AUD
Given next week’s major economic events in Australia and Europe, EUR/AUD is likely to see an increase in volatility… which is great news for traders, as the pair has been trapped in a 180-pip range for nearly a whole month now. Yesterday, rates dipped down to test the bottom of the recent range around 1.5700 before bouncing back strongly, while today’s seen the polar opposite price action, with the pair testing 1.5880 resistance before reversing back to the middle of its range as of writing.
One way or another, a breakout from this range is in play next week. A confirmed bullish breakout could open the door for a continuation toward the minor highs near 1.5970 and eventually the longer-term resistance levels above 1.6100. Meanwhile, a bearish breakdown could expose the Fibonacci retracements of the June rally at 1.5580 (50%) and 1.5510 (61.8%).
Source: TradingView, FOREX.com
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.