AUD/USD Squares Off As RBA & FOMC Kick Off May

Will AUD sire a commodity FX downtrend? To find out, see our forecast!

Talking Points:

  • DXY starts month of May with tier-1 information in try to sire trend
  • AUD/USD value examination as 1m 25D risk-reversals pull aloft forward of RBA
  • CFTC CoT shows brief covering in rates forward of FOMC, Jobs report

Join Tyler in his Daily Closing Bell webinars during 3 pm ET to plead marketplace developments.

Monday supposing a still start to a week that is not approaching to sojourn quiet. Monday night in a US will yield RBA rate announcement. We could be saying a start of support for AUD. Depending on a tinge from Governor Lowe, we could see strength in AUD opposite breakwater currencies and other weaker commodity currencies like NZD. In grabbing discernment from a options market, AUD 1-month risk reversals (out-of-the-money or OTM calls relative to OTMputs) traded to their top turn in 6 weeks display traders are reduction disturbed about a downside than anytime in 6 weeks. We saw a identical growth in a EUR before it changed to 1.09.

The USD will have to work to get out of a rut. The Citi Economic Surprise Index recently showed a disastrous reading for a US. Such a reading indicates determined disappointments in a information relative to economist expectations. Wednesday’s FOMC and Friday’s NFP will demeanour to pull a Economic Surprise Index behind above 0 after a unsatisfactory start to a week with US ISM Manufacturing (APR) blank expectations of 56.5 with a reading of 54.48.

Another note that should be kept on trader’s screens this week is to keep tabs on a JPY. May 3-5 will paint Golden Week in Japan, that will leave Japanese markets sealed and expected driven by outmost factors such as risk sentiment. Despite US underperformance, mixed tellurian indices are during all-time highs, and a perspective design from IG Client positioning is display an rhythm value watching. IG Client positioning is display trade fighting a spike in JPY crosses, that from a contrarian viewpoint could preference a delay of JPY weakness. For USD/JPY, many traders are examination a daily tighten above 112 and ~123 on EUR/JPY. A dermatitis there could see a run aloft in JPY crosses.

Interested in saying what IG client’s positioning means for a JPY? Find out here!

Closing Bell’s Top Chart: May 1, 2017, as tier-1 US Economic events await, USD/JPY exam resistance

AUD/USD Squares Off As RBA amp; FOMC Kick Off May

Tomorrow’s Main Event:Reserve Bank of Australia Rate Decision (MAY 02)

Few design extreme changes in a routine opinion from a RBA when a pronounce Tuesday morning. However, a marketplace is vouchsafing of a downside disposition for AUD when looking during a options action. Traders are expected to watch for slight adjustments to their forecasts to see if optimistic denunciation is employed. If so, we could see AUD continue Monday’s pierce higher.

IG Trader Sentiment Highlight: Haven currencies might continue to sell off

AUD/USD Squares Off As RBA amp; FOMC Kick Off May

EURCHF: As of May 1, IG retail trader information shows 47.5% of traders are net-long with a ratio of traders brief to prolonged during 1.1 to 1. The series of traders net-long is 3.8% reduce than yesterday and 18.9% reduce from final week, while the series of traders net-short is 4.9% aloft than yesterday and 80.9% aloft from final week.

We typically take a contrarian perspective to throng sentiment, and a fact traders are net-short suggests EURCHF prices might continue to rise. Traders are serve net-short than yesterday and final week, and a multiple of stream perspective and new changes gives us a stronger EURCHF-bullish contrarian trade bias.(Emphasis Mine)

While EUR/CHF is not a hotly watched pair, it is a useful substitute for sentiment. As a breakwater currency, a clever CHF tends to uncover risk-off undertones. Conversely, a weakening CHF shows that risk could be bid in a days or weeks ahead, that perspective might be in a routine of highlighting.

Written by Tyler Yell, CMT, Currency Analyst Trading Instructor for DailyFX.com

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