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Though there have been tests and false breaks for AUDUSD over the past few weeks, the technicals currently defining its range are both clear and strong. Should volatility over the next 36 hours hold up, there may be an opportunity for a short-term setup.

Why Would AUDUSD Stay in a Range?   ·         Levels to Watch: -Range Top:       0.6610 (Trend, Fibs) -Range Bottom: 0.6335 (Fibs)   ·         Most of the currency market’s most liquid pairs have turned to congestion and directionless volatility, but few have clear technicals that could stand up to the chop that is defining price action. Fundamentally, it is interesting to see that many of those pairs that were previously key carry trade pairs are offer the most frequent range opportunities even though risk sentiment is still high. For breakouts, we will be primarily concerned about Friday’s NFPs.     ·         The congestion band that has developed for AUDUSD is somewhat messy. Through there is somewhat of a wedge bias here, the solid levels are horizontal. Our primary interest will be a short from the Fib confluence around 0.6610 as it aligns itself to the dominant trend. Support is just as prominent though with a two month pivot level at 0.6335. Suggested Strategy   ·         Short: Entry orders will be set at 0.6585 to hold within the range but allow for some trend.   ·         Stop: An initial stop at 0.6655 is tight considering should a spike in volatility hit. To secure profit, move the stop on the second lot to breakeven when the first target hits. ·         Target: The first objective equals risk (70) at 0.6515. The second target will be 0.6405.

Trading Tip – Though there have been tests and false breaks for AUDUSD over the past few weeks, the technicals currently defining its range are both clear and strong. Should volatility over the next 36 hours hold up, there may be an opportunity for a short-term setup. We are specifically looking for volatility to hold up as we plan to cancel all open orders before the US session on Friday to avoid what is expected to be a very weak US employment report. We will monitor any active positions when this data hits the wires and shore up stops should spot be near entry when the report crosses. Also in our strategy, the stop has been placed relatively close to the ceiling to further curb the chance that we would be caught in a fast-moving breakout. Altogether, this trade would be entered over the next trading session and take profit by Monday or Tuesday.

Event Risk Australia And US

Australia – In the past week, the Australian docket has dropped a number of top market moving indicators into the mix. An RBA rate decision and 3Q GDP numbers marked the end of the busy period for scheduled event risk. Looking over the next week, there are few reports that can boast a real threat to move the market – and actually follow up on that warning in a market whose fundamental interests are askew. Immediate risk is seen in the October trade balance due tonight, but this indicator (no matter how important it may be economically) is not influential even in the best of circumstances. After the weekend, the data will begin to pick up in pace and importance. Business and investor confidence will offer an outlook for growth over the next few months. The real danger is in the employment change report – an easy gauge for growth that has proven itself in the past.

US – There is only one US indicator that will be on fundamental dollar traders’ minds for our trade window and that is the November non-farm payrolls report. In the past months, the outlook for a recession has been thoroughly priced in for the dollar; but there is still speculation as to how deep it will ultimately be and when conditions will start to improve. The forecasted 330,000 net cut would mark the largest single drop in employment for the world’s largest economy since 1981. This would go a long way towards redefining the outlook – and relatively strength – of the US economy. Other indicators like ICSC sales, consumer credit and pending home sales are important fundamentally; but they will play out over the longer-term and won’t have an immediate impact on our short-term range.

Questions? Comments? Send them to John at jkicklighter@dailyfx.com.