AUDUSD CURRENCY VOLATILITY – TALKING POINTS:
- AUDUSD overnight implied volatility skyrockets to 12.1 percent, the metric’s highest reading since the Currency Market Flash-Crash on January 3
- Australian employment numbers in addition to a slew of economic indicators out of the United States will be closely watched during Thursday’s session seeing that the data will likely dictate AUDUSD’s next direction
- Lack of market liquidity due to the upcoming Good Friday and Easter Sunday holidays threaten possible breakouts from recent narrow trading ranges which could exacerbate price movements
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AUDUSD could experience a volatile session tomorrow considering overnight forex options contracts are pricing in the largest expected move for spot prices since the flash-crash witnessed by markets on January 3. Uncertainty surrounding Thursday’s high-impact economic data out of Australia and the US has likely bid up AUDUSD 1-day implied volatility to its second highest reading of the year.
AUDUSD OVERNIGHT IMPLIED VOLATILITY
FOREX MARKET IMPLIED VOLATILITIES AND TRADING RANGES
Australia’s economic data is expected to cross the wires at 1:30 GMT during Thursday’s session. Markets are expected to closely scrutinize the Aussie employment numbers for potential insight into the country’s labor market, especially considering tepid language found in the Reserve Bank of Australia’s March meeting minutes published yesterday.
The RBA’s remarks unsurprisingly weighted negatively on AUDUSD seeing that the central bank stated a decrease in the overnight cash rate would likely be appropriate if inflation fails to firm and unemployment trends higher.
FOREX ECONOMIC CALENDAR – AUDUSD
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Although Australian employment numbers will likely take the spotlight for AUDUSD traders during Thursday’s session, a slew of economic data out of the US could weigh on the currency pair later in the day. It’s worth mentioning that the Citi US Economic Surprise Index shows a sizeable drop-off since January, indicating that America’s economic data has broadly surprised to the downside as of late.
That being said, a data-dependent Fed could adopt a dovish tilt following suit from central banks around the world if leading indicators like the Markit Services and Manufacturing PMIs disappoint. On the contrary, better than expected economic reports out of the US will likely bolster the greenback.
AUDUSD PRICE CHART: DAILY TIME FRAME (NOVEMBER 12, 2018 TO APRIL 17, 2019)
According to AUDUSD overnight implied volatility, the currency pair is calculated to trade between 0.7139 and 0.7231 with a 68 percent statistical probability. Spot AUDUSD currently trades at 0.71659 with prices forming a rising channel since the beginning of the month. Recent gains have pushed the Aussie above near-side resistance from the downtrend line formed by the tops printed on December 4, 2018 and January 31, 2019. Yesterday’s advance also helped reclaim the 23.6 Fibonacci retracement line drawn from the flash-crash low on January 3 this year to its 2019 high – a level that now looks to serve as technical support.
However, if Australian economic data falters tomorrow, AUDUSD fundamentals could quickly weaken considering the RBA has a previously stated that a deteriorating jobs market would likely put a rate cut on the table. That being said, an increase in the unemployment rate has potential to send spot AUDUSD plunging. With overnight implied volatility suggesting a mere 46 pip move, the possibility of a risk-reversal could be underpriced. On the contrary, a robust employment report could drive AUDUSD to fresh month-to-date high.
AUDUSD TRADER SENTIMENT PRICE CHART: DAILY TIME FRAME (OCTOBER 19, 2018 TO APRIL 17, 2019)
Check out IG’s Client Sentiment here for more detail on the bullish and bearish biases of EURUSD, GBPUSD, USDJPY, Gold, Bitcoin and S&P500.
The latest AUDUSD trader sentiment data from IG shows that 43.4 percent of traders are net-long resulting in a ratio of traders short to long at -1.31 to 1. Moreover, the number of traders net-long is 7.3 percent lower than yesterday and 10.9 percent lower relative to last week.
TRADING RESOURCES
Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.
- Written by Rich Dvorak, Junior Analyst for DailyFX
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