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AUD/USD Short Term Outlook Ahead of US Durable Goods Orders

AUD/USD Short Term Outlook Ahead of US Durable Goods Orders

2016-08-25 09:43:00
Oded Shimoni, Junior Currency Analyst
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Talking Points:

- AUD/USD failing above 0.77, but 0.76 keeps holding as support

- US Durable Goods data is ahead, with Yellen still in focus

- SSI is showing shorts are being reduced, hinting at a potential shift

The AUD/USD is trading above the 0.76 handle at the time of writing, as the pair continues to trade in a narrow range after rejecting above the 0.77 handle on several attempts.

Looking ahead, US Durable Goods Orders headlines the economic docket, and could have a short term market moving effect.

Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.

AUD/USD Short Term Outlook Ahead of US Durable Goods Orders

Click Here for the DailyFX Calendar

Preliminary July US Durable Goods Orders are set to hit the wires 12:30 GMT.

Expectations are for an improvement to a 3.4% print from the prior -3.9% figure.

The numbers could see an initial surge of volatility, and a better than expected read could send the US Dollar higher, potentially with stocks as well.

With that said, participants might hold back on clear directional conviction until tomorrow's Janet Yellen speech in Jackson Hole, with the market likely to scrutinize the speech for hints on a potential Fed hike in September.

If Yellen mirrors previous commentary by Dudley and Williams, the US Dollar may trade higher on that speech.

AUD/USD Technical Levels:

AUD/USD Short Term Outlook Ahead of US Durable Goods Orders

Click here for the DailyFX Support & Resistance tool

We use volatility measures as a way to better fit our strategy to market conditions. The AUD/USD is seeing reduced levels of volatility lately based on 20-day ATR readings, while implied volatility measures are suggesting the Aussie is likely to be more active versus the US Dollar than most other majors on a 1-week basis.

Taken together this might suggest that the pair’s volatility could remain subdued in the short term, with the Yellen speech Friday a potential game changer for this dynamic.

In turn, this may imply that range bound trading plays might be appropriate in the short term.

AUS/USD 30-Min Chart (With the GSI Indicator): August 25, 2016

AUD/USD Short Term Outlook Ahead of US Durable Goods Orders

(Click to Enlarge)

The AUD/USD is trading slightly beneath a potential resistance zone below 0.7650 at the time of writing, with GSI calculating higher percentage of past movement to the downside in the short term.

The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns. By matching events in the past, GSI desscribes how often the price moved in a certain direction.

You can learn more about the GSI here.

Further levels of resistance might be 0.7674, followed by 0.7700-0.7710 and 0.7750.

Levels of support might be 0.76245, 0.76, 0.7575 and an area below 0.7550.

We generally want to see GSI with the historical patterns significantly shifted in one direction, which alongside a pre-determined bias and other technical tools could provide a solid trading idea that offer a proper way to define risk.

We studied over 43 million real trades and found that traders who successfully define risk were three times more likely to turn a profit.

Read more on the Traits of Successful Traders” research.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 44.45% of traders are long the AUD/USD at the time of writing.

You can find more info about the DailyFX SSI indicator here

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

Follow him on Twitter at @OdedShimoni

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

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