AUD focuses on RBA and CPI

It has been a relatively quiet start to the week for the major FX pairs with geopolitical risk remaining a dominant theme. 

Source: Bloomberg

The latest developments suggest the US has imagery of the missile involved in the MH17 crash and proves Russian separatists’ involvement. At the same time the death toll in the Middle East just continues to rise and this is also likely to have a play on risk.

The resilience in some of the risk currency pairs has been quite remarkable at present and I just sense we could be gearing up for a catalyst. AUD/USD is trading just shy of 0.9400 and faces some key tests as economic releases pick up through the week.

While data is limited today, tomorrow we have Reserve Bank of Australia Governor Glen Stevens speaking. He is likely to address some of the key themes he’s been focusing on recently including AUD strength. However, he is unlikely to bring much of a surprise to the market.

On Wednesday we have Q2 CPI which some feel might be pushed higher by higher energy prices. On the USD side of the equation, focus will also be on CPI with the market looking for 0.2% growth, which would leave the annual rate at a steady 2%. These two readings have the potential to cause some volatility for the pair.

Bollinger bands in play

From a technical perspective, the short-term Bollinger bands have been working perfectly on the pair. In this instance I am using a short-term band over a 20-day period with a standard deviation of 2.00. Buying the bottom-end and selling the top-end has worked an absolute treat as a range is maintained. On the lower end the level to look out for right now is at 0.9320 for potential buying opportunities, while at the top end 0.9450 could present selling opportunities. Until we get a break out of these bands, then a change in strategy would be warranted. For now though, I would be looking to actively play these levels.

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