Potential AUD/USD trade

AUD/USD has broken through the bottom of the range it has been trading in over the last two months (0.9321 to 0.9500) and it seems the bears are having better control at present.

Source: Bloomberg

The oscillators are suggestive that rallies could be selling opportunities, especially with the August 5 RBA meeting in view. With the Federal Reserve building a case for a move in the funds rate (albeit slowly)  in the future, the RBA could build on the growing momentum of the USD and look to further jawbone the AUD lower. After all it seems the level of discomfort the bank has expressed around the AUD has been growing, so tactically this could be a really good opportunity for the central bank.

Tonight’s US payrolls report will be very interesting indeed; while the media will be quoting the headline jobs print and unemployment rate, I feel there are other metrics which should be looked at.

Keep an eye on the inflation aspects – namely average hourly earnings (expected at 2.2% on the year), core personal consumption expenditure (+1.4%) and personal spending and earnings. Given the Federal Reserve has detailed the slack in the labor market, economists will be watching the U6 unemployment rate. This is the broadest measure of unemployment and contains a number of other variables, and given the Fed has detailed that it looks at this, so should we. As it stands the U6 rate is 12.1%.

I favour potential short positions in the pair here and would look for a move to the 200-day moving average at 0.9184. I feel it could be prudent to place a potential stop loss at 0.9365 (just above the 38.2% retracement of the recent move from 0.9472) in case the trade goes against me is prudent.

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