AUD/USD trade idea

The set-up on the daily chart had suggested a move to the bottom of the channel around $0.8370. However, the technical picture seems to have altered somewhat.

Source: Bloomberg

On the daily chart we’ve seen two bullish key day reversals in four sessions (as circled), which tells you the bulls seem in control at present. Momentum has shifted as well, with bullish crossover on the stochastic oscillator, while a crossover looks imminent on the MACD as well.

AUD/USD needs to move above the 20-day moving average at $0.8738 and we should then see the former October uptrend come into play at $0.8800. I would be looking to see how the pair behaves around this resistance – a subsequent rejection could suggest short positions. The top of the Bollinger Band is at $0.8897. However, the prospect of the pair trading in a range of $0.8800 to $0.8650 looks high for the rest of the week.

With volatility back below the year’s average at 13% (I’ve looked at the VIX index), traders are happy to hold high-yielding currencies. With the RBA continuing to hold a neutral bias, the AUD seems much more compelling to hold than the NZD. Watch out for Q3 Australian wage data at 11:30 AEDT, which is expected to remain unchanged at a 2.6% annualised pace. Adjust this for headline inflation of 2.3% and real wages are expected to be modestly positive, but 2.6% is still not going to trouble the RBA.

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