AUD could be sold on strength

Major FX pairs remained stuck in tight ranges with a lack of catalysts to drive sentiment.

Australian dollar coin
Source: Bloomberg

A potential theme to look out for this week will be US dollar strength as activity on the US economic calendar ramps up. There is a growing opinion that the Fed will raise rates sooner than what the market expects and this is really holding risk back at the moment. In fact, this has the potential to drive the USD higher this week which would make for some interesting moves in the FX space. The dollar index remains above 80 and could see some buying on dips in anticipation of hawkish FOMC minutes and further hawkish rhetoric from Fed members.

Among the Fed members speaking this week are Kocherlakota, Lacker, George, Lockhart and Evans. On top of all this, Goldman Sachs came out and revised its rate hike expectation to the third quarter of 2015 as opposed to the second half of 2016.

Break below uptrend a concern

AUD/USD is just hanging on and faces some key tests this week with a number of releases to look out for locally and around the region. The pair is currently at 0.937 but importantly has lost its grip on an uptrend support line which was in place since February. It seems traders will have to weigh positive signs from local economic data and balance it out with the risk of jawboning.

In Australia we had ANZ job ads yesterday, NAB business confidence today, Westpac consumer sentiment tomorrow. Then of course Thursday we have the jobs numbers which could surprise to the upside. Some traders might now be looking to sell AUD/USD on

Spot FX AUD/USD chart
Click to enlarge

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