The rate at which conflicting information is being unleashed, it is very important for investors to stay focused and aim for their long term objective. Even after Trump called for sweeping tax reforms which included reducing corporate tax and giving tax breaks to high earners, the USD now is facing opposition after it was revealed that Mnuchinprefers Governor Powell over Former governor Kevin Warshto take over from Yellen after February 2018. Kevin Warsh is perceived as hawkish after his previous opposition of Fed QE program. Being realistic, all these are speculations and unless there is a statement from the National Treasury-won’t happen, confirming the same then the USD should be on the receiving end and probably extend losses.
In the meantime, let’s see what happens in the short term beginning Friday where we have NFP and many expect labor market contraction after two devastating Hurricanes last month. We also have ADP private pay rolls and ISM Non-Manufacturing PMI. Should there be an improvement in the employment component of the latter then we expect support for the USD even if ADP figures come is lower than forecasted. The opposite shall happen if there is an obvious decline.
The Aussie is expected to gain going forward and after yesterday’s non-eventful OCR announcement, the RBA noted that an expensive AUD will surely drag inflation and the economy with it. This was somehow bearish but Aussie added 0.2% against most currencies. Tomorrow in the Asian session we expect Retail Sales to expand 0.3% from 0.0% recorded in July. If figures come as expected, Aussie bulls should benefit.
I will look to buy the Aussie and liquidate the CAD in the next few trading days. Technically, there is a price-action, stochastics bullish divergence in the weekly chart with a smooth price action bounce from the lower BB. Price looks to test the 200 MA and the resistance trend line at 0.985. I will enter long if bull pressure pushes price to close above 0.985 and place at around 0.975 which is just below minor support trend line in the daily chart.
This will turn out as follows:
Buy stop: 0.9850
Stop Loss: 0.9750
Take Profit: above 1.00
Have a good trading day and watch out for US economic indicators in the NY session.