Good morning Forex Kings,
We are now coming back into the major data flows which will give the market a clearer direction. This morning our attention is on the AUD as Australia reports its unemployment data.
The markets had previously priced in a rate cut from the RBA in February, however the RBA has mentioned previously there has been a gentle turn around in the housing market, additionally unemployment figures came in positive for November. If we see a strong result today, this could put further doubt into the market about a Feb rate cut from the RBA.
Looking at the broader picture, Australia will also report CPI (inflation) next Wednesday which has been forecast to have increase YoY. This suggests we could see some strength back in the AUD leading up to the RBA interest rate decision early Feb.
We are already positioned was a buy on the AUDUSD, however our plan here is to utilise a slightly higher leverage as our stop loss will be significantly tighter. We will also hold our first position.
DXY (USD Index)
The USD is holding its price below the broken trend line. Our trade could become invalidated if the USD breaks higher. We will be watching this one closely. However, if we see the USD index continue lower from this level we can be fairly certain our trade will reach our targets.
AUDUSD 4 Hour Time Frame
The AUDUSD is holding its price a key support level and an inclining support level. There is a bullish divergence between the RSI and market price. Our long term target is at 0.7000 however with this trade we will look for a shorter target to secure profits, whilst leaving our first trade for the longer duration.
AUDUSD 1 Hour Time Frame
Trade Setup: BUY market price, stop loss set at 0.6790 and take profit set at 0.6920
Stop Loss: 52 PIPS
Take Profit: 78 PIPS