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Chart of the Day: AUDUSD

Last Friday we looked at the NZDUSD, and the pair seems set to trend strongly, albeit the risk of profit-taking is growing given the one-way move since 17 June. While we can focus on the G20 Summit, or the poor China PMI data (out Sunday), tomorrow’s Reserve Bank of Australia meeting could influence the NZD, with the Kiwi following the AUD and taking sympathy from whether the RBA cuts or doesn’t cut rates.

Chart of the Day - July 1, 2019

With that in mind, AUDUSD, at least for the next two days, is my Chart of the Day, although we’re seeing a strong move higher in the NAS100 and new all-time highs can’t be ruled out. AUDUSD is a market I’m keenly focused on, though, as the playbook for tomorrow’s RBA meeting is worth exploring.

Firstly, consider traders have been happy to bid up the AUD, with the pair closing through the neckline of the double-bottom at 0.7022. In a similar vein to NZDUSD, the upside to the technical target of the double-bottom is punchy, which we can see from the setup on the daily chart above. We should also consider the playbook for tomorrow’s meeting.

  • Looking at Aussie cash rate futures pricing, a cut tomorrow is priced at 60%. We can make a strong case for the RBA to cut or hold. This suggests we could get some decent spike higher or lower at 14:30 AEST, and it poses a risk to traders holding AUD exposures over the announcement.
  • AUDUSD overnight implied volatility sits at 8.39%, residing at its 30th percentile. Through option pricing, we can see this equates to a 29-pip move (with a 68% degree of confidence) in either direction in spot, with the one standard deviation range at 0.7056 to 0.6998. This hardly screams of fireworks.
  • Eighteen of 26 economists are calling for the cut, with all of the Big Four forecasting the cut.

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