Daily Trade Recommendation

Originally updated: 07:30

Trading Bias: SHORT

Currency pair: AUD/USD

Current Sentiment: Bearish

In today’s trading session we will be focussing on selling opportunities on the AUD/USD.

Fundamentals:

Overnight the RBA made a decision not to cut rates, the general consensus across the market had been that that they would cut as such the pair spiked upwards solely from relief. The RBA were firmly dovish and made it clear that further cuts are coming should their situation not significantly improve, this is a step closer to additional cuts as oppose to their previous statement which had been that no cuts where on the immediate horizon whilst they gauged the effectiveness of their recent cut, meaning that the recent bout of AUD weakness had been based on the speculation for a rate cut without firm commentary from the RBA.

Despite the relief all of the rhetoric coming from the RBA was negative for the AUD and we can only expect it to grind lower over the coming weeks as we approach future rate decisions.

On Friday this week we have US Non Farm Payrolls which are expected to be USD positive and remove the last hurdle before the Fed moves to hike rates.

Using the above information we can look for the recent relief on the AUD to provide a great price to get in at on the AUD pair, where I will be trading “into” the event – essentially looking to trade the divergence in outlooks for the two currencies leading into that NFP event and closing trades prior to the event to alleviate the risk.

I don’t expect there to be any opportunities at the opening of the session and will be awaiting medium term opportunities to present themselves once attractive price action is reached, the wildcard to watch out for on this trade as mentioned in my previous posts is the potential for Chinese stimulus, however this has shifter slightly from the markets point of focus given the recent action from the PBoC the market will want to gauge the effectiveness of recent cuts before it takes bets on further Chinese intervention.

Technicals:

We expect this pair to sell off throughout this week.

There is strong resistance at 0.7900 should it rally that far failing that 0.7880 is noted as medium term level of resistance which could provide trading opportunities should the price pull back. Look for the price to bounce off this level if it retraces back to it.
Remember to be aware of intra-day news as this can very often change the sentiment which makes our trade weaker. Look for any news that could negative for the USD or any reference to Chinese easing, which would change the sentiment to bearish on this pair.

Other Market Moving News:

Looking ahead on today’s calendar we have Spanish Unemployment Change, UK Construction PMI and a speech from Gov Carney, Canadian GDP and New Zealands Dairy Trade index.

Apart from the RBA overnight news is relatively limited with the only story of note being source comments from within the BoJ stating that they view USD/JPY price action as being in the “upper limit of comfort zone” which of course weighed on the pair.