Could the Reserve Bank of Australia (RBA) adopt a less hawkish stance in their upcoming rate statement?
Our Event Guide for the November RBA Decision indicates that policymakers may recognize inflation nearing target levels, potentially signaling the beginning of an easing cycle sooner rather than later.
Here are some trend continuation opportunities I'm monitoring for AUD/CAD and EUR/AUD in anticipation of this shift.
Net Risk-on Environment Scenario: AUD/CAD
AUD/CAD 1-Hour Forex Chart by TradingView
Over the weekend, OPEC+ announced a delay in their planned production increase by one month, which has provided support for crude oil prices and could bolster the Canadian dollar (Loonie). Additionally, the Canadian currency may attract anti-USD flows this week, as traders look to avoid the U.S. dollar amidst the elections.
In this context, a less hawkish Reserve Bank of Australia (RBA) announcement in a risk-on environment could allow AUD/CAD to continue its selloff within its descending channel pattern on the hourly time frame. The pair is currently testing the channel's upper boundary near the 50% Fibonacci level and R1 (0.9200), coinciding with a significant psychological level. Notably, the 100 SMA is below the 200 SMA, indicating bearish sentiment, which could drive the price back to the swing low at S1 (0.9100) or channel support.
Net Risk-off Environment Scenario: EUR/AUD
EUR/AUD 1-Hour Forex Chart by TradingView
The euro region lacks significant catalysts, making the euro a strong candidate for risk flows as traders avoid the U.S. dollar due to major upcoming events. The euro typically attracts safe-haven flows in Europe, particularly since the lower-yielding Swiss franc may not be as appealing given the Swiss National Bank’s dovish stance.
Furthermore, mid-tier flash manufacturing PMIs from Spain and Italy are expected to show slight improvements early in the week, potentially giving the euro a solid footing. If this occurs, EUR/AUD could gain momentum from its bounce off a rising trend line, an area of interest, and the 38.2% Fibonacci retracement near the pivot point level (1.6480). Thanks to Hubtrading for this insight.
In addition, the 100 SMA is positioned above the 200 SMA, suggesting bullish momentum at present, which could push the pair towards the swing high of 1.6607, just below R1 (1.6640).
Whichever trade setup you choose, ensure your risk management plans are in place, and stay vigilant regarding top-tier market catalysts that could influence overall sentiment!
