Quite a shaky start of the week as the after-effects of Japan’s policy announcement from Friday kicked in. This week we are all ears to hear from Australia as AUDUSD forming head and shoulder chart pattern on the forex dance floor. Checkout the outlines here and I’ll get in more detail during our private time 🙂
During Sunday night’s Sydney session Australia’s TD Securities Inflation was released at 01:00 AM GMT followed by China’s manufacturing and non-manufacturing PMI at 1 AM which came in better than expected at 50.6.
During London session we saw the following:
- Independence Day holiday in Switzerland
- Spanish manufacturing PMI: 51.0 vs. 51.6 expected, 52.2 previous
- Italian manufacturing PMI: 51.2 vs. 52.5 expected, 53.5 previous
- French final manufacturing PMI: steady at 48.6 as expected
- German final manufacturing PMI: revised higher to 53.8 vs. steady at 53.7 expected
- Euro Zone final manufacturing PMI: revised higher to 52.0 vs. steady at 51.9 expected
- U.K. final manufacturing PMI: 48.2 vs. steady at 49.1 expected
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The Institute for Supply Management (ISM) Manufacturing Index is scheduled next at 2 PM to give us indications of the overall economic condition in US.
The combination could create a shaky start for the EUR/USD pair.
RBA Rate Decision Coming Up
The Reserve Bank of Australia is scheduled to make its much-anticipated interest rate decision this week. A number of Invest Divas were already expecting an interest rate cut in last month’s RBA statement, citing that the decision to stay on hold simply increases the odds for additional easing this time.
However, cutting interest rates to boost inflation and economic activity could cause the property bubble to burst. So it’s pretty much a tough time for the Reserve Bank of Australia. You can’t make everyone happy mate!
A decision to keep rates unchanged and stay optimistic about an economic rebound could mean stronger gain for Mr. Aussie against his forex dancing partners.
A dovish bias or an actual rate cut could make Mr. Aussie drop like a hot stone.
Either way, additional volatility could ensue before, during, and after the event so make sure you’ve got the necessary adjustments if you have any AUD positions open.
AUDUSD Forming Head and Shoulder – Technical Analysis
While investors are speculating the RBA outcome, the AUDUSD forming head and shoulder on the daily forex dance floor. The pair basically tried breaking above the resistance at the 076 level which coincides with 23% Fibonacci retracement… with no luck.
On Monday it seems the pair has changed direction and heading back towards the Ichimoku cloud.
0.7440 is our first pivot level and the neckline of the Head and Shoulder Pattern which should be your first point of focus before and after the RBA rate decision
1- Target pivot levels before RBA rate statement for a short term profit
2- Wait for the results and target either resistance or support depending on a bullish/ bearish outcome