According to market analysts, the Australian dollar currently has a neutral forecast. Against the U.S. dollar, the AUD has been showing some strength lately, but this was done ahead of the U.S. jobs report for the month of January, and it took into account the fact that many traders believed that the Fed would raise rates again. Jobs reports were weaker than December, but still better than expected. And the Fed did not actually raise rates. This forced the Aussie back off of its one month high against the USD, and back down to where it was.
What the AUD does in the next few weeks against the USD is dependent on U.S. policy right now. The Australian market has declined a bit thanks to falling commodity prices, but it appears to have stabilized. That puts the pressure on the USD, and if the dollar strengthens, it will rise against the neutral Aussie. If it falls, the Aussie has potential to climb up to the high levels it was at just a week ago.
Some of this hinges on what Janet Yellen says before Congress later this month. The Chairwoman of the Federal Reserve speaks before the Finance Committee twice a year, and traders will be searching for clues as to what the Fed’s next move will be in terms of the next rate hike. It was originally predicted for implementation sometime in March or April, but then many traders believed they would push it forward to the end of January. Riding on this, the dollar sank against the AUD. And when the Fed didn’t make this move, the AUD dropped once again. Right now, consumer sentiment seems to be pointing toward a rate hike sometime early in 2017, but this could change instantly once the Fed moves.
Forex and binary options traders need to be looking at these fundamental concepts for a long term prognosis of what the pair will do, but they also need to be looking at technical indicators, depending upon the timeframes and expiries that you are looking to trade. The AUD/USD has seen a bumpy ride, but there are some telltale signs that you should be looking at to formulate a trading strategy. For example, looking at momentum will be very helpful. On Friday February 5th, there was a period of a few hours where the drop in price was almost constant, falling over 100 pips as the world reacted to the jobs data being released. Just putting together a number of put binary options here, or selling it short in the Forex market and waiting, all would have had great results. Obviously, you should trade in the marketplace where you are most comfortable using amounts that are beneficial to you, but when great market opportunities like this occur, not taking advantage of them is foolish. Jobs data is almost always a market mover, and when there is already a weakness in an asset, such as with Aussie traders misreading what the Fed would do, the impact can be quite severe, sometimes bordering on an overreaction. It’s not clear yet if the declining Aussie is an overreaction at this point, but the dollar has positioned itself so that it definitely has the upper hand. As more data emerges in the coming days, it will be interesting to see how much of a correction is made. Look to minute technical information in order to get a feel for how you should proceed here. For now, looking at strength (the USD), and playing cautiously in case of an AUD correction seems like the best way to proceed here, regardless of your trading methods.