It’s been an interesting year so far. Despite the U.S. election outcome well behind us, a stronger U.S. economy, a hawkish Fed, the USD is softer this week so far. The US Dollar index remains above 101.00. Commodity prices overall are strong (not including oil) and China’s economy is continuing to improve beating CPI year over year expectations.
Although there was a broad based USD selling today, I avoided a EUR long and instead chose the AUDUSD after a nice reversal setup. The AUD has been very resilient of late, but sellers tend to emerge near the .7700 barrier. With that in mind, with a Target today of .7698 an entry long was taken and the stop loss was moved up to eliminate any risk in advance of Fed Yellen’s testimony today. Although her testimony was not expected to be different from yesterday, whenever she speaks, the market listens, and the potential for volatility is extremely high.
As price reached our Target we exited, as it was an area where yesterday’s high, our daily target and the .7700 barrier all grouped closely together. Could the AUD continue to climb with USD weakness to the .7800 figure? Yes it could and my sense is that the rate hike perception is leaning more toward June than March. It’s also interesting to see that gold is staying comfortably above $1200. This suggests to me that the market is nervous about Europe’s political future.
When it becomes clearer what President Trump’s fiscal policies will be and when the next rate hike is likely to be announced, then the USD will strengthen and it will be onward and upward. In the meantime, watch the charts and my preference remains to look for EUR short setups.
Keep your stops tight and continue to trade what you see not what others think.
Good luck with your trading!