If anything, both AUDUSD and NZDUSD are topping and by the way, this is the first time in 4 good years that it has broken or touching the 200 period moving average. That is enough indicator of how the USD has been on the receiving end. The recent development and retracting of hawkish comments by the Feds couldn’t help the situation either. At last the Fed were quick to notice that deflationary pressures were not idiosyncratic but rather systemic. Wages are not growing despite unemployment being on multi year lows. The proliferation of part time and underemployment is not helping either and to put thing in perspective, the USD will hinge on Friday’s NFP. The economy is expected to produce 183K jobs with stagnant wage growth-0.2% and unemployment rate unchanged at 4.3%. If all the set expectations are surpassed, then the greenback will soar and will go a long way to cement the tepid state of the US economy. We all saw Q2 GDP growth which was lower than expected at 2.6%-missing the mark at 2.7% even though Q1 was revised higher. It is surely a make-or-break for the greenback and tomorrow will surely mean a lot when the RBA makes their decision. OCR is expected to remain unchanged at 1.5% and with household debt-at 170% of disposable income-keeping expenditure and consequently inflation down, Governor Lowe should be worried. Property prices in major cities are rising faster than wages and if this continues, drastic measures should be taken to reduce the marching Aussie.
Because of the herding factor-the positive correlation between the AUD and NZD, I will look to short the AUD when a sell signal is printed in the 4HR chart this week. So far, the Aussie is making higher highs in the 4HR chart with a strong buy signal. In the weekly chart, there is a sell signal printed by the stochastics with selling pressures shown by the past two candlesticks.
Trade as follows:
Sell Limit: 88.70-89.30
Stop Loss: 89.70
Take Profit: Depending on where you sell, aim for a 1:3 risk reward ratio
Have a good day.