This week our currency strategists were specializing in one other round of employment situation updates, this time from Australia and the U.K, as potential drivers for short-term opportunities.

Out of the 4 scenario/price outlook discussions this week, just one discussion arguably saw each fundie & technical arguments triggered to develop into a possible candidate for a trade & risk management overlay.  Try our review on that discussion to see what happened!

Watchlists are price outlook & strategy discussions supported by each fundamental & technical evaluation, a vital step towards making a top quality discretionary trade idea before working on a risk & trade management plan.

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EUR/AUD 1-Hour Forex Chart by TradingView

On Wednesday, our strategists had their sights set on the upcoming Australia Employment report.  The evaluation in our Event Guide showed that recent survey data was mixed on the roles sector, resulting in markets expecting a slowdown in net job adds and the unemployment rate holding regular at 4.1%

With those expectations, listed here are a few potential scenario what we were watching out for:

The Bullish Aussie Scenario: If the roles data got here in stronger than expected, we figured EUR/AUD might attract fundamental bears, and if that’s the case, we were anticipating a break below its head and shoulders neckline. We thought that this scenario could potentially attract technical sellers and potentially drive a move towards S1 (1.6370) and even S2 (1.6130) if risk-on flows were present within the markets.

The Bearish Aussie Scenario: If the employment figures dissatisfied or showed mixed results, we thought GBP/AUD might find support at the underside of the consolidation area. This could possibly be further supported if broad risk sentiment turned soured, or benefitted from any net bullish news from sterling’s heavy weak of economic releases.

Well, Thursday rolled around, and the Australian jobs report decided to throw us an final result weirder than Australia’s break dancing routine on the Olympics.

The headline unemployment rate ticked as much as 4.2% (from 4.1%), reaching a two-and-a-half-year high. Nevertheless, the underlying components painted a much stronger picture:

• Net job additions got here in at a whopping 58.2K (vs. 20.2K expected)
• June’s figures were revised higher from 50.2K to 52.3K
• The participation rate jumped to a record high of 67.10%
• Full-time employment rose by 60.5K, while part-time jobs decreased by 2.3K

This final result triggered our fundamental argument for a bearish EUR/AUD bias, because the strong underlying job growth outweighed the tick higher within the unemployment rate. The pair popped on the discharge but immediately swung lower throughout the first hour, eventually dropping below the 1.6600 neckline support as anticipated.

EUR/AUD continued its descent through the session, finding buyers across the 1.6535 level, which had been a robust support area throughout early August.

While the pair didn’t quite reach our S1 goal at 1.6370, the move was in keeping with our expectations. By the tip of the week, EUR/AUD was hovering across the 1.6525 level, well below our discussed neckline support, suggesting that sellers remained on top of things.

So, how’d our strategy discussion do? Well, it was about as accurate as a kangaroo with a GPS – we got the direction right, but barely overestimated the magnitude of the move.

Our expected move based on fundamental evaluation was spot on because the strong underlying job growth would spark net buying within the Aussie this week. The structural price breakdown we were watching also materialized, with the pair breaking below the crucial 1.6600 support.

Overall, we’d rate this discussion as “highly likely” in supporting a possible positive final result. For individuals who shorted when the basic and technical arguments were triggered on Thursday, they’d a solid likelihood to see a net positive final result, depending on the trade plan chosen and the way it was executed.

The sustained move below 1.6600 provided ample opportunity for traders to capitalize on the breakdown, even when the S1 goal wasn’t quite reached. The limited downside to the previous support offered a transparent level for risk management.

It’s value noting that the broader context for the Australian dollar was bullish throughout the week. The Aussie saw consistent gains against most major currencies, supported by a combination of domestic data, global risk sentiment, and hawkish comments from RBA Governor Bullock.  All put together, this underlying strength and event outcomes likely contributed to the sustained pressure on EUR/AUD.

In hindsight, traders who combined our evaluation with a broader view of AUD strength, was entering a position with a high probability of success, which is the goal of this content series: finding top quality scenarios with strong probabilities of success for newbies to overlay their very own risk and trade management practices on that is sensible for his or her trading situation.