It was one other busy week with global inflation updates and many central bank speak, our strategists had a various coverage set this week on each currency-crosses and major pairs.
Out of 5 discussions, just one scenario outlook saw each fundie & technical arguments triggered to turn out to be a possible candidate for risk management overlay. Take a look at our review on that discussion to see what happened!
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AUD/USD 30-min Forex Chart by TradingView
On Wednesday , our strategists focused on the upcoming Australian jobs data (as discussed in our Event Guide), it’s potential to spark volatility for AUD/USD and the way traders may react. The principal idea was that if expectations of a weak jobs gain played out, that the downtrend in AUD/USD would stay intact, given the recent sentiment shift giving the U.S. dollar’s strength.
We thought that there was room for a bounce, and if that’s the case, then we’d be looking ahead to bearish reversal signs across the confluence of indicators, mainly around Fibonacci area and moving averages.
Well, AUD/USD did rally, even ahead of the Australian jobs report, testing the 50% Fibonacci retracement level right at the discharge. The Australian jobs update was arguably net negative as there was a net job lack of 6.6K and the unemployment rate ticked higher from 3.7% to three.8%. Also, the labor force participation dipped from 66.7% to 66.6% to reflect weaker confidence in the roles market. This end result actually triggered our bearish fundamental argument for a AUD/USD short bias.
AUD/USD actually bounced on the news, but then the market did not sustainably trade above the 61% Fibonacci area (our noted “line within the sand”) and commenced producing lower highs on the chart–it was at this point our technical argument for a brief bias was triggered. Following each fundie and technical triggers, AUD/USD continued to maneuver lower, likely with the assistance of the broad risk-off environment on account of falling Fed rate cut hopes and rising geopolitical tensions.
And on Friday, volatility and risk-off vibes picked up massively because of news reports of Israel’s strike on Iran, sending AUD/USD right down to our discussed potential goal areas (S1 (.6380) then S2 (.6360)), where a bottom was quickly found.
Broad sentiment and AUD/USD quickly reversed after it had been assessed the attack was “muted and thoroughly calibrated,” which was then followed by each countries down playing the military motion. This signaled to the markets that neither country desired to escalate further, reducing the danger of wider conflict within the Middle East dramatically…for now.
Overall, the basic scenario of weak Aussie jobs played out and our line within the sand technical argument was tested, held and led to a selloff. And on condition that the next move was enough to check our goal area, we’d argue that this discussion was high likely supportive of a positive end result, and arguably without the necessity for complex risk/trade management.
So again, just one discussion was valid on each technical and fundamental fronts this week, but sometimes all you would like is one good trade, right?
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