News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
More View more
Real Time News
  • Fed's Barkin says he views moderate inflation mostly delivered from market power and price transparency $SPX
  • The S&P 500 breakdown is testing the first major zone of support and we’re looking for a reaction. Get your S&P 500 technical analysis from @MBForex here:https://t.co/JrTNmQ5c7g https://t.co/7HSxMUZYWn
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.89%, while traders in EUR/GBP are at opposite extremes with 65.56%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/7tkZBRqU8Z
  • Heads Up:🇺🇸 Fed Evans Speech due at 17:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-09-24
  • After an aggressive stimulus-driven rally drove prices in equities throughout the summer, a bit of uncertainty has begun to enter the equation. Get your #equities market update from @JStanleyFX here::https://t.co/mwy35kvLtv https://t.co/thSFEF50Px
  • Commodities Update: As of 16:00, these are your best and worst performers based on the London trading schedule: Silver: 0.35% Gold: 0.32% Oil - US Crude: 0.15% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/G2fyCxsb3V
  • UK virus cases rise by 6,634, most since start of pandemic $GBPUSD
  • Forex Update: As of 16:00, these are your best and worst performers based on the London trading schedule: 🇨🇦CAD: 0.18% 🇬🇧GBP: 0.11% 🇪🇺EUR: 0.05% 🇳🇿NZD: -0.08% 🇨🇭CHF: -0.24% 🇦🇺AUD: -0.33% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/ZclQDTTkBp
  • Fed's Bullard says we may see a near full recovery by end of year for U.S. - BBG
  • Get your Thursday market update from @DailyFX Chief Strategist @JohnKicklighter 👇 https://t.co/gvNcFyaEgi
Bearish AUD/USD on Falling Carry Trade Premium

Bearish AUD/USD on Falling Carry Trade Premium

2017-10-30 21:33:00
Tyler Yell, CMT, Currency Strategist
Share:

Point to Establish Short Exposure: Pull-back to 10-DMA 77.54 cents per AUD

Spot: 76.88 cents per AUD

Target 1: 76.25 US cents per AUD (October low)

Target 2: 75.71 US cents per AUD (July 5 low)

Invalidation Level: 78.84 cents per AUD (50-DMA)

If you are looking for other strong trading ideas, you may enjoy our FREE Trading Guides

I remember when the Australian Dollar use to be a carry trade currency. That may be the phrase many traders tell their kids who pick up trading in the next decade.

After coming off the worst week of 2017, another leg lower may be in store for the Aussie. The argument for looking lower for AUD/USD comes after another leg of the long-term bullish AUD view is taken out. Let’s count the ways the long-term bullish view is evaporating at a time when the USD is beginning to look attractive on a trade reversal basis.

The most recent argument to be dismantled is that global capital flow will go to Australia on the basis of its yield advantage over the US. There are a few ways to look at yield advantages, but the easiest is to look at expected central bank rates in the future.

The Federal Reserve Dot Plot, an anonymous voting tool of Fed members to say where they think the reference rate should be in the future based on their understanding of the economy, shows a median dot for the end of 2018 at 2.125%.

The Australian Cash Rate futures market shows the expected RBA policy rate could remain under 2% at the end of 2018, effectively ending the Carry Trade for the currency historically most known within the G10 for attracting yield-hungry investors.

Add to the vanishing yield premium; the RBA remains hesitant to show any signs of shifting to a hawkish stance as most central banks have had to walk back their hawkish rhetoric due to an anemic economy.

Lastly, the commodity with the strongest correlation to the Australian Dollar, Iron Ore has fallen by ~25% since August and could continue to fall as China increases demands for high-quality Iron Ore ahead of a seasonal period of lower buying due to winter.

Many traders would argue that AUD/USD is oversold and profit-taking may ensue. That’s fair, but I would look to a corrective bounce to remain under 0.7750 to provide an opportunity to re-engage the short-term view or look for a November opening range breakdown to trigger a resumption lower. The lower band of support to watch may be the October 27 low of 0.7625.

Access our popular free trading guides to enhance your trading strategy here.

AUD/USD Chart with resistance at 77.54 outlined:

Bearish AUD/USD on Falling Carry Trade Premium

Chart created by Tyler Yell, CMT

IG Client Sentiment Highlight:Australian Dollar Set to Fall on Bearish Bias

Bearish AUD/USD on Falling Carry Trade Premium

AUDUSD: Retail trader data shows 53.1% of traders are net-long with the ratio of traders long to short at 1.13 to 1. The number of traders net-long is 0.5% lower than yesterday and 7.0% lower from last week, while the number of traders net-short is 7.3% higher than yesterday and 16.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUDUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed AUDUSD trading bias.

---

Written by Tyler Yell, CMT

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES