Good afternoon trading floor team,
Firstly we are turning our attention to the AUDUSD. There are a number of positions coming out tonight ready for the week ahead. We have crude oil and the NZD ready to go later this evening.
The AUD is coming under some pressure due to increasing tensions between Australia and China.
The China V Australia trade war is heating up with China implementing a 200% import tax on Australian wine. China has added wine to the growing list of Australian goods that are barred from markets. The trade war appears to have stemmed from Australia’s support for an inquiry into the origin of the Corona-virus. The recent tax on Australian wine (up to 212%) makes wine unsellable to China. Chine is Australia’s largest export market. Previously China targeted beef, coal, barley, seafood, sugar and timber. Meanwhile, Australia is working on a mutual defence treaty with Japan, a strategic rival of China.
Additionally, on the USD front, there are a number of risk events that may provide some USD strength.
This week the USD takes center stage with Non-Farm Payrolls, unemployment data and initial jobless claims towards the end of the week. FED Chair Jerome Powell and Treasury Sec Mnuchin testify in front of Congress. This comes after their public fallout, with Mnuchin refusing to extend several of the Fed’s lending facilities. Janet Yellen who is set to take the Treasury Secretary seat is looking to provide further stimulus, however, without the support of the Senate, it is less likely she will be able to provide the large stimulus the Democrats are looking for. The key Senate runoff in Georgia is leaning towards the Republicans, and they are looking like they will maintain the Senate majority. With that in mind, markets are beginning to price in a smaller stimulus check than initially thought. The Republicans are not willing to budge on the estimate 500 billion package.
With that in mind, fundamentally we have a bearish AUDUSD setup.
AUDUSD – Daily Charts
A major demand zone can be found at the 0.74 area. A double top pattern has been put in, potentially a triple top.
AUDUSD – 4 Hour Charts
The market is now breaking down from the rising wedge formation. We are now looking to enter a short position on the pair with targets at the 0.7250 area.
Trade Setup: SELL Market Execution, current price 0.7377, stop loss 0.7437 and take profit 0.7250.
Stop loss: 60 pips
take profit: 127 pips