Short EURAUD
Updated
This is an hourly chart of EURAUD, but I have gone through all the time frames and it all looks good to sell for me. I am just treating this potential break out as a timing event. At the time of writing, there are a few near term factors that could influence this pair.
1) AUD figures. There is a new home sales figure (likely to be soft) and NAB business confidence due out in the next 2 hours (at time of writing), so it's a risk that those numbers don't print our way. Conversely, it's got great contrarian potential as the market has been bearish on the AUD, so it's likely the market is short (though I can't confirm this).
2) General risk on. Over the weekend (30th and 31st of March) we have had positive news out of China and the market has opened up risk on this morning (equities bid, yields bid), so this should help to keep the AUD bid. Watch the open of Asia, and particularly China, to get some confirmation. We also have China Caixin PMI, which printed in contraction last month, so any move but to expansion will again be AUD positive.
3) Brexit woes. Brexit is still dragging on and this should help keep EUR subdued in the short term, which could help keep the position in the money while we wait for the next impulse leg (hopefully down)
4) Euro figures. Later on, we have Euro zone flash inflation rates, and this could help to keep the bearish momentum on EUR.
5) Australian budget talks. There is plenty of chatter that the Australian government will deliver a spend happy budget shortly. Australian general elections are coming up and the government here has been under siege for some time. It's likely they deliver a budget with lots of tax cuts which will give the economy a sugar hit that might convince the RBA they can sit patiently on rates (market is currently expecting a cut). This is an unknown, but i'd rather bet on politicians serving self interest than serving the common good into an election, so this budget being AUD positive is a fair bet. The budget will be released tomorrow (2nd April Australian time), but most of it's contents will have already been leaked, so that's also AUD positive.
I'm in the trade and will update with levels as we progress, but it may be a quick stop out if data doesn't match up, and then rethink the whole thing
1) AUD figures. There is a new home sales figure (likely to be soft) and NAB business confidence due out in the next 2 hours (at time of writing), so it's a risk that those numbers don't print our way. Conversely, it's got great contrarian potential as the market has been bearish on the AUD, so it's likely the market is short (though I can't confirm this).
2) General risk on. Over the weekend (30th and 31st of March) we have had positive news out of China and the market has opened up risk on this morning (equities bid, yields bid), so this should help to keep the AUD bid. Watch the open of Asia, and particularly China, to get some confirmation. We also have China Caixin PMI, which printed in contraction last month, so any move but to expansion will again be AUD positive.
3) Brexit woes. Brexit is still dragging on and this should help keep EUR subdued in the short term, which could help keep the position in the money while we wait for the next impulse leg (hopefully down)
4) Euro figures. Later on, we have Euro zone flash inflation rates, and this could help to keep the bearish momentum on EUR.
5) Australian budget talks. There is plenty of chatter that the Australian government will deliver a spend happy budget shortly. Australian general elections are coming up and the government here has been under siege for some time. It's likely they deliver a budget with lots of tax cuts which will give the economy a sugar hit that might convince the RBA they can sit patiently on rates (market is currently expecting a cut). This is an unknown, but i'd rather bet on politicians serving self interest than serving the common good into an election, so this budget being AUD positive is a fair bet. The budget will be released tomorrow (2nd April Australian time), but most of it's contents will have already been leaked, so that's also AUD positive.
I'm in the trade and will update with levels as we progress, but it may be a quick stop out if data doesn't match up, and then rethink the whole thing
Note
So the ducks have lined up for this trade today. Chinese data was a beat and has added to the general risk on tone the market is enjoying during Asia. Expect bounces and retracements, but the stage looks set for lower prices nowNote
Still looking good on this trade. Hold it into RBA and Aus budget, and hopefully the AUD can get on a run. Soft EUR data overnight should also helpNote
Now that we move closer to crunch time, it might be smartest to cover this pair into RBA and look to reload after the meeting. I think this is prudent as there is a slight chance the RBA turn more dovish which could really hurt the AUD in the short term. I think the likelihood of this happening is very low, but it is probably best practice to cover, and look to re enter on confirmation of a neutral RBA. Firstly though, we will have to negotiate a few risk off events (Brexit vote fails again, poor NZ business confidence) which may weigh on the AUD, plus we have building approval data due out in about 3 hours and RBA in about 6 hoursTrade closed manually
OK, I have covered this for now as we experience a little bit of risk off and AUD figures approaching. I will look to re-enter if data suits, but now that I am out, I might wait for RBA in about 3 hours timeOrder cancelled
CLEAR OUT OF ALL AUD LONGS! MARKET HATES THE AUD! BASIS RBA
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