On Mondays I usually start my analysis with weekly charts and if something catches my eye, I move on to lower intervals looking for opportunities to open an order. This week the situation on the EURAUD pair indicates a possible breakout from over 4 months of consolidation.
In the weekly chart we can see that since the appearance of the large downward candle in the first days of June the price has not overcome any of the extremes of that week (1.67-1.60). The inside bar that has been created has still not been “broken” and the price is going down and up. The MACD is currently in the ascending phase.
At night, or in fact in the early morning of Tuesday 20.10, we will learn the minutes of the RBA (Australian reserve bank) meeting. The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The documents contain a full description of the policy discussion, including differences of opinion. The minutes also record the votes of individual Committee members.
Generally speaking, if the RBA is a hawkish about the inflation outlook for the economy, the markets see a greater possibility of interest rate increases, this is positive for AUD and vice versa – if politics is doveish and a risk that the rates will be cut AUD will loose. And the latter can be expected, as for some time now there is information from the antipodes indicating that negative rates are on the table and about to be introduced. This could happen at the November meeting.
Looking at the hourly chart – H1 – we can determine a smaller consolidation in the IB range from the weekly chart, the upper range of which is 1.6590. The price is currently approaching the upper edge and overcoming it may signal further increases in the direction of 1.6700.
The impulse for such a breakout may be the above mentioned event as well as the occurrence of C.Kent one hour before the publication of the minutes. Christopher Kent is the Deputy Governor (Economic) of the Reserve Bank of Australia and in this position he is responsible for the Department of Economic Analysis and Economic Research of the RBA and is the Chief Economic Advisor to the Governor and Board of Directors of the RBA.
If in the speech mentions % rates – the market is likely to react to this, and with little liquidity during these hours – it may be a few dozen or so pips moves. So maybe it’s worth spending the night and sit by the charts…?
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