With the US reporting on highly vulnerable sectors of the fundamental landscape and all Australian data out of the way early in the week, it looks likely that we will see just enough bad Aussie news to push AUDUSD to support for a long entry before the dollar bear comes back.
Trading Tip – Today’s erratic market environment is not conducive to a range-bound approach. Conservative traders that are intent on following a range-bound approach should be mindful of this when evaluating these trade ideas. We will look to limit risk by removing any unfilled orders by the end of the trading week or should spot hit 0.9500.
Event Risk for Australia and the United States
Australia – Following today’s profound drop in Business Confidence, the last substantial release on the Australian calendar will be May’s Consumer Confidence reading on Tuesday. The tone of this release is likely to be bleak as well as the economy grapples with record-high interest rates at 7.25%. This will be followed up on the same day by the Wage Cost Index for the first quarter. The tight conditions in the labor market have put upward pressure on wages, which in turn bids up overall inflation. The RBA has made a trade-off in stalling to ease rates to squeeze out inflationary pressure, but to date it seems only the growth part of this scenario is playing out as prices remain high. This release may therefore carry more weight than usual, as it particularly pertinent to the direction of near-term monetary policy.
US –The week’s event risk begins with Tuesday’s release of April Retail Sales figures. Following the drop in imports seen in last Friday’s Trade Balance release, this metric is likely to amount to more dire news about the reluctance of the American consumer. Wednesday’s headline CPI will surely be distorted by energy and food prices, with traders likely to focus on the core reading. It was an uptick in this metric that saw the Fed hint at a pause in rate cuts at the last meeting of the FOMC. Thursday’s Philadelphia Fed survey will be closely watched as it will offer one of the first pieces of data covering May. The dollar rebounded towards the end of April, and this release will offer a timely look at how the ISM survey may lean in the coming weeks.
To contact Ilya with comments regarding this or other articles he has authored, please email him at ispivak@dailyfx.com
