AUD Turn Bearish after Decline in Full Time Jobs

Australian DollarDuring the past two weeks, there is a meltdown in the global financial markets. The main reason behind this is the tension between the United States and North Korea.

The Yen currency gain strength against its major rivals as the investors went after safe-haven assets and it includes the Australian Dollar which is considered as a commodity currency. The currency pair AUD/JPY has lost approximately 300 pips since August 1st to trade at 85 levels. We forecast the currency pair to decline further and the reason for the same is discussed below.

The Australian Bureau of Statistics last week stated there was an addition of 27900 jobs in July which is up from 20000 in the past month.

The analysts forecasted an addition of 1,980 jobs. The headline figure looks exciting however the detail report tells us about specific vital issues. There is a decline in full-time employment by 20300 and only 48,200 jobs will be added in part-time employment. There is a decrease in unemployment by 1800. Based on these figures, it is not going to be a positive impact on the Aussie.

Financial Times

As per the Japanese Ministry of Finance, there is an increase in trade-surplus of Yen0. 34 trillion in July, up from Yen 0.09 trillion in June and above the estimates of analysts of Yen 0.20 trillion. Similarly, Ministry of Economy, Trade and Industry submitted a report mentioning about 2.2% month on month increase in industrial production in June as compared to the analysts’ expectation of 1.6 percent. In May this year, there is a 1.6% increase in industrial production data in economic activity.

HSBC’s currency strategists say that most of the traders are under the impression that all G10 central banks are moving forward interest rates normalization. In addition to this, analysts warn that such kind of expectation might never happen. The base of the argument is that domestic market is not pricing 50 percent chance of a hike in rate in quarter 2 2018.

Hence, Aussie is overvalued at the moment because of the price discrepancy between currency market and rates. It is to be noted that RBA is concerned about increasing household debt in low inflation environment and it is evident from the recent policy meeting minutes. At the moment, the likelihood of a hike in rate is negligible. As a result of which, the Australian Dollar is likely to dip low against Yen currency which is driven by reliable economic data.

The currency pair AUD/JPY is facing a resistance level at 86.80 which is evident from the image below. Also, the stochastic oscillator is declining towards bearish zone. As a result of which, downtrends of the currency pair is expected at the moment.

AUDJPY Pair August 21st 2017

AUDJPY Pair August 21st, 2017

In spot currency market, it is recommended to open a short position near 86.60 and place the stop order above 87.40. For booking profit, the order should be placed near 85.20 levels. In a similar manner, based on the analysis, one may purchase a put option to generate higher returns.

It would be worthwhile to place a strike price of about 86.60 and select the expiry period around 29th of August 2017.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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