USD Trading Outlook
- The euro (EUR) moved higher after Mario Draghi’s conference and is now range bound around 1.3666 against the dollar. The euro may reverse yesterday’s gains should stronger employment data come from the US. The Fed may consider tapering sooner if unemployment shows strong signs of decline.
The US dollar (USD) has corrected some losses against the Japanese yen. The pair moved to 102.12 ahead of today’s Non-Farm Payrolls release. A stronger dollar may emerge should a number come out greater than 180 thousand this afternoon.
The US 500 (SPI) has ended weaker, two days after the ADP NFP release on Wednesday. The index is currently trading just above 1787 and is expecting the release of the upcoming Non-Farm employment change for future direction.
- WTI Crude (OIL) is currently ranging at 97.30 dollars per barrel. The crude may test resistance at 97.95, alternatively, support lies at 97.00 and 96.30.
Mover & Shaker with FX Options
Gold (XAU) may experience wild volatility on the Non-Farm payroll release. The precious metal is currently settled at 1229.
- Option traders may consider constructing Long Straddle Strategies on Gold to capitalise on higher volatility this afternoon.
- The Long Straddle is constructed by purchasing an at-the-money Call and an at-the-money Put option on Gold, and may prove profitable if the metal’s price moves significantly higher or lower.
The AUD saw some very heavy turnover yesterday, rallying initially to .9130 after the retail sales data where it ran into a barrage of selling. The inevitable sell-off then ensued and AUD/USD dipped to .9065 after the RBA mentioned the currency in its statement. Strong protection ahead of a barrier option at .9050 held firm despite a number of tests. Today should be another busy day with GDP data likely to have a short-term impact (but with no more RBA meeting until February, any impact will be short-lived).
It will be a busy day for the AUD with retail sales in the morning (+0.4% MoM expected for November) and the RBA rate decision in the afternoon (no change in policy expected). The AUD/USD is not much changed from yesterday morning with the market focussing on other currencies. We saw a surge in the GBP during Asian trade followed by strong surges in the NZD and the USD. Strong data from the US should give the USD a bid-tone for the rest of the week pre-NFP.
The AUD is in for a busy week with the RBA meeting tomorrow and the non-farm payrolls data on Friday. The speculative market is sitting short of AUD, based on what I’m hearing from the big Prime Brokers, and if real-money funds start to reduce their selling of the AUD we could be in for a retracement. Unofficial inflation data, minor building data locally, and of course the HSBC China manufacturing PMI are all due for release today and that should ensure a busy session.
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