The EUR/AUD pair has remained within a clear range through the past week of trade, offering a solid opportunity to play a failure at fairly significant resistance.
[B]Trading Tip - The EUR/AUD pair has remained within a clear range through the past week of trade, offering a solid opportunity to play a failure at fairly significant resistance. A proposed short entry at 1.6230 with a stop at 1.6275 gives the trader good risk-reward ratios, and the relatively tight stop prevents traders from accumulating significant losses on a spike higher, especially as such a move will likely be quick, strong, and relentless with little retrace. Event risk is relatively limited in both economies, increasing the likelihood of low-volatility range trade, however, the trade should be exited by August 16th, as the looming CPI event risk out of the Euro-zone is substantial. A potential flip in positioning is seen at resistance at 1.5955, but the range trader should wait for a confirmation of reversal before entering a EUR/AUD long position.[/B]
[B]Event Risk Euro-zone and Australia [/B]
[B]Euro-zone[/B] - Fundamental data out of the Euro-zone will be relatively limited this week, with the first reading of the second quarter GDP report likely to draw the most attention. Estimates for the figure are not available as of yet, but expansion could slow down slightly from the rapid 3.1 percent annualized pace we saw in the first quarter. Nevertheless, GDP should remain strong as tight labor markets fuel consumption and Asian demand for European products keeps export output aloft. On August 16th, inflation data will be released, and given its impact on interest rate expectations for the European Central Bank, the figures could ignite major price action.
[B]Australia [/B]- The most significant event risk out of Australia will be at the very beginning of the week, well before US traders even return from their weekend and thus, limiting its impact on the Australia dollar. The RBA?s Quarterly Policy Statement will give further insight into the central bank?s outlook for the economy, however, it is unlikely to contain any news that we have not already heard about in the RBA?s most recent press release after they hike rates to 6.50 percent. Sentiment will be well covered with a NAB Business survey for July and Westpac Consumer gauge for August, however, these releases are rarely major market movers.
Data for August 12 - August 16 Data for August 12 - August 16
Date Euro Zone Economic Data Date Australian Economic Data[/B]
Aug 14 Euro-zone GDP (2Q A) Aug 12 RBA Quarterly Policy Statement
Aug 16 Euro-zone CPI (JUL) Aug 13 NAB Business Confidence (JUL)
Aug 14 Westpac Consumer Confidence (AUG)
[B]Written by Terri Belkas, Currency Analyst[/B]