Home Forex Analysis And Forecasts AUDUSD: Prime candidate for analysis paralysis

AUDUSD: Prime candidate for analysis paralysis

Employment numbers from the US tonight, followed by Australia tomorrow, could see the Australian dollar decide which half of no-mans’ land it wants to finish the week in.

The dollar had experienced several weeks of choppy, whip-sawing conditions, which I fully expect to continue into the foreseeable future. The Australian dollar finds itself midway between a 2.5c it has been stuck in for 6 weeks now and likely to remain choppy for a while yet.

I don’t expect to break out of the broader USD0.86 – USD0.89 range which the dollar has been trading in for some weeks. Despite seeing weekly ranges of up to 260 pips as it ricochets between key levels, we have seen open-close ranges of as little as 10 pips. To describe it as confused and directionless would be an understatement.

Currently around the midway point of the 0.864 to 0.890 range, Employment data from the US tonight and Australia tomorrow could provide the conditions to decide which half of this range it wants to be in.

I have seen plenty of calls for market bottoms or reversals. All we know for sure right now is that it is in a range, until it breaks out. And whilst within a range, range-trading strategies are preferred.

There is a strong zone of resistance around the 0.875-0.878 area. If we see strong US employment and soft Australian employment tomorrow we should remain firmly below this zone and target the 0.864 lows. However if US employment disappoints and Aussie employment conquers, then I expect A$ to break through this resistance area to sit at the top half of the 2.5c range.

Controversy over local employment figures’ legitimacy will not have any short-term influence over the Aussie dollar’s reaction. There is widespread distrust regarding the local figures but markets will still react in the short-term.

Until we see about 12 or more months of data, it will be difficult for economists to be confident with the underlying trend. Traders however will still be quick to react to any surprise divergence from the expected figures, regardless of how unreliable they are deemed to be.

It will then be over to the US again to have the final say on the A$ closing price this week as the ‘real’ employment data is released for Nonfarms Payroll.

With the FED openly stating they’re closely watching inflation and employment data then any surprise divergence from the consensus will send ripples through the markets. Strong NFP data alongside weak Aussie employment could even see A$ test the 0.864 lows.

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