The latest employment update for Australia is likely to get the Aussie dollar jumping soon.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD after bad U.K. GDP numbers, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
- Futures turn negative as Fed’s Powell warns of prolonged recession
- Oil holds near $30, caught between demand loss and supply cuts
- Powell says the Federal Reserve is not considering negative interest rates
- Fed’s Powell says economy may face ‘extended period’ of weak growth
- US producer prices tumble in April
- UK GDP shrinks by record 5.8% in March, harder COVID hit ahead
- U.K. Manufacturing production fell by -4.6% m/m in March
- The U.K. total trade deficit, excluding non-monetary gold and other precious metals, narrowed by £1.3B to £2.3B in Q1 2020
- Japan Economy Watchers survey fell to 7.90 in April from 14.20 in March of 2020
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- ECB Lane speech at 4:00 pm GMT
- RBNZ Governor Orr speech at 10:45 pm GMT
- Japan Foreign investment, M2 money supply at 11:50 pm GMT
- Australia Consumer inflation expectations at 1:00 am GMT (May 14)
- Australia Employment Update at 1:30 am GMT (May 14)
- New Zealand Budget at 2:00 am GMT (May 14)
- Japan 30-year government bond auction at 3:45 am GMT (May 14)
What to Watch: AUD/CHF
As mentioned in the intro, we have got the latest Australian employment data right around the corner, likely to spark a strong round of volatility for the Australian dollar. Expectations are for a big jump in the unemployment rate from April’s read of 5.8%, and more than 4 million jobs lost.
To play the potential pop in volatility, we’re watching AUD/CHF as the pair retests a strong area of interest around the 0.6275 handle, first serving as resistance in early May, now serving as support over the last few sessions.
We’ve also seen declining “highs” over the last three sessions and Stochastic signaling short-term overbought conditions, indicating the bears are starting to take control of the pair.
The price action is in favor and technical patterns are in favor of the bears at the moment, and the situation to look out for before building a short position is a weak Australian update and a break of the 0.6275 handle.
With a daily ATR of around 85 pips, the strong swing low around 0.6150 is an attainable short-term target to shoot for, and with a stop guide just above the falling “highs”, you have a solid potential return-on-risk.
For the bulls, the highly unlikely scenario of better-than-expected Australian jobs update is the catalyst to watch out for a potential long position.
If that plays out with a break above the falling “highs”, consider a buy on the break or a buy/retest/hold pattern setup for an entry strategy.
With a tight stop just below the 0.6275 support, the risk-reward potential is pretty good if considering a swing position, a sensible idea given the longer-term price trend higher and recent global risk-on sentiment.