The Aussie made a temporary rebound as we had expected in our June 7th article, to as high as around $0.7680 level on the 14th on July before plunging more than 200 pips in the past 8 days as market reacted to the lower than expected Australian employment numbers. The meeting minutes released on July 19th afterwards also suggested that RBA is ready to adjust its monetary policy if inflation report this Wednesday remains weak. The last report showed that Australia ped into deflation at -0.2% for the first quarter of 2016. This time around, market expects a better number of 0.4% for the second quarter.
Over to the United States, we must say that the Feds Funds rate decision this Wednesday that is expected to hold did not dictate much demand for the Greenback, though the subsequent GDP report on Friday that is expected to grow at 2.6% definitely stage the Dollar on a positive outlook compared to 1.1% during the first quarter of 2016. In the event that report failed market expectation, we might see a surge in the AUD/USD exchange rate at the back of demand for higher yield currency supported by rising gold price.
Aussie Futures CoT Charts
On the futures market, among the G8 currencies, Aussie was reported to net the biggest increase in longs by 17,215 contracts to +33,400 contracts. It was also reported that market participants were net long in all currencies against Dollar, except for the Mexican Peso, Euro and the Pound.
Looking back at the charts, if indeed we are completing wave IV, then there is possibility that the exchange rate is to test the $0.7950 level to complete the correction before plunging further in reaction to the expected RBA rate cut in August.
Halal Traders look forward to deploying our range strategy in the time being.
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