Today’s Key Market Drivers: 8th August 2018
“Canadian Dollar falls and triggers a price rejection buy against the US Dollar.”
The three big movers on Tuesday were the Aussie Dollar, Euro, and Canadian Dollar. The Aussie bounced higher after the RBA rate decision which gave off a slightly more hawkish view of inflation expectations in the coming 12 months and with the Chinese currency and stock market rebounding, traders decided to buy the AUD higher in the short term. The RBA said in its statement. “The latest inflation data was in line with the Bank’s expectations. Over the past year, the CPI increased by 2.1 percent, and in underlying terms, inflation was close to 2 percent. The central forecast is for inflation to be higher in 2019 and 2020 than it is currently.” If inflation was to rise in the coming 12 months and the impending mortgage crisis was contained it could give the RBA reason to raise the official cash rate in the second half of 2019. The AUD v USD rallied back above the 200 EMA on the 4-hour chart, however, I would be keen for you to review my daily video update today because there is a potential head and shoulders short setting up on the AUD v JPY. My view is that any rally on the AUD will be short-lived.
The Canadian Dollar lost ground against the US Dollar and price has pushed back off an important trend line triggering a long price rejection trade. Whilst the Caddy lost ground against the US Dollar the Euro rallied strongly but I believe most of this was profit taking from traders who have recently been short on the EUR v USD and the Chinese currency bouncing back higher did have something to do with it also. The GBP v USD rallied off a double bottom low as did the Euro and there was no significant long-lasting fundamental reason why the Euro or Pound should be higher.
This morning I have taken a long position on the USD v CAD based off a price rejection trade opportunity from the 4-hour chart which also lines up nicely with the new Daily AO filter. The AUD v USD on the 4-hour chart is also giving off a price rejection trade to the downside however the AO is not stretched sufficiently above the zero line on the daily chart in my opinion for this trade to be valid so my preference is to consider a short on the AUD v JPY once the head and shoulders neckline on the 4-hour chart is breached.
The RBA’s Governor Lowe speaks in Sydney today at 1.05pm AEST and the AUD may get volatile on any comments he makes during his address. There is no significant high impacting news for the European or US trading sessions on Wednesday and the next major Central Bank report to watch is the RBNZ’s August statement which is due Thursday morning at 7.00am AEST.
As we head into Thursday stock markets in Asia are likely going to be positive and until we get the USA’s latest CPI numbers on Friday any gains on the US Dollar could be muted, however it has not stopped me from taking a long USD v CAD position today nor will it stop me taking a short AUD v JPY trade if it confirms.
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About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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