Today’s Forex Guide

AUDUSD Forex Trading Strategies March 2016| Eyeing GDP


Mar.01.2016

AUDUSD Forex Trading Strategies March 2016

While many forex pairs have been dancing straight forward with no specific direction, Mr. Aussie might be on a new adventure of his own and we may need to revise our AUDUSD forex trading strategies March 2016.

Since we are expecting hot market moving events from both Australia and the US this week, it only makes sense that we conduct an Invest Diva Diamond analysis on this pair. What is expected from AUD/USD on the forex dance floor?

 

AUDUSD Forex Trading Strategies March 2016 Cartoon AUDUSD Forex Trading Strategies March 2016 | Mr. Aussie and Ms. USA Dancing on the Forex Dance Floor

1- Australia's Economic Outlook

Is it about time to see the glass half full rather than half empty when it comes to Australia's economics outlook? Governor Glenn Stevens and a bunch of analysts at Goldman Sachs certainly think so. Here are the main areas in focus to come up with best AUDUSD forex trading strategies March 2016:

  • Reserve Bank of Australia held rates at 2.0 percent in March: Our mates over in the land down under decided to keep interest rates to a record low of 2.00% for the 10th month in a row. Details also reveal that the central bankers were feeling a bit confident over the economy’s growth and inflation prospects.
  • Growth section could be moderately slower in 2016 comparing to last year: While several advanced economies have recorded improved growth over the past year, conditions have become more difficult for a number of emerging market economies. China's growth rate has continued to moderate.Commodity prices have declined very substantially over the past couple of years. This partly reflects slower growth in demand but also, in some key instances, large increases in supply. The decline in Australia's terms of trade has continued. From the commodity side of things, we can expect the bearish sentiment to continue.

 

  • Expectations of weaker growth is already priced in: After the massive dive of Mr. Aussie from March 2013 all the way through July 2015, it seems as if no bad news is effecting him as much and he has been continuing to range versus most major counterparts. That could be because super investors and forex traders have already priced in the weak economies of both China and Australia. Therefore,  moderate declines are not enough to create a brand new bearish momentum.

 

  • Better than expected GDP readings could create an upside momentum: Since Aussie traders no longer seem to be surprised by negative readings, the opposite could happen if better than expected GDP numbers are published. This could also be this true for the upcoming GDP announcement on Wednesday at at 12:30 AM GMT.

Summary: The bottom line with Australian economy is a growth environment that is a little bit challenged, but at least some of those growth challenges are recognized by the market. This could be a sign that 2016 could be a transition year for our Aussie mates, and the worst could already be behind them.

 

2- US Economic Outlook

Now that the worst start to a new year in a long time is behind us, the market participants are starting to see the truth behind the US economy.

Warren Buffet is optimistic on the US economy, and so are we. Despite what you've been hearing from the noisy reporters who are seeking ranking for the TV shows, U.S. economy actually looks pretty healthy. The range of new data suggests the slump we've seen since last fall -- coinciding with severe volatility in the financial markets -- is fading.

For one, US Q4 revised GDP up 1.0% vs 0.4% growth expected last week to put the glass-half-empties in their place. The largest contributors to the upward revision to inventory investment were retail trade and mining, utilities and construction. As a result, inventories subtracted only 0.14 percentage point from GDP growth instead of the previously reported 0.45 percentage point.

Coming up this week we have a bunch of jobs related data starting with ADP Non-Farm Employment Change on Wednesday at 1:15 PM GMT, weekly Unemployment Claims on Thursday at 1:30 PM GMT,and Non-Farm Payrolls on Friday at 1:30 PM.

Mind you that the US jobless rate now stands at lowest since 2008, which by itself is pretty damn impressive.

These are all good news for Ms. USA (US dollar, USD). You might ask,then why is the USD dropping? I have two reasons for you:

1- Market sentiment

2-Inevitable technical pullback

With this, better than expected data in March can help Ms. USA stand back up on her feet and move up against her major dancing partners, including Mr. Aussie, to help with the bullish AUDUSD forex trading strategies.

 

3- AUD/USD Technical Analysis

Now that we've crushed the fundamentals, let's see what the technical point of the Invest Diva Diamond suggests.

  • Big Picture Monthly Chart: The pair seems to be in the midst of forming an ascending Double Top chart pattern dating back to January 2001. However, it has been stuck in the 0.71 area in the past 5 months, not able to break below the ascending neckline of the Double Top chart pattern. A confirmation of a break below this level could open doors for further drops towards 0.63 and 0.5650 in extension. However if this level holds, the Double Top formation could be aborted and we could see the beginning of a new cycle with a brand new uptrend.

 

 

AUDUSD forex trading strategies March 2016 monthly chart double top pattern neckline breakout AUDUSD forex trading strategies March 2016| Monthly chart double top pattern neckline breakout Potential

 

  • Daily Chart Market Sentiment: The range on the daily chart has remained between 0.73 and 0.69, as the pair dancing around the flattening  ichimoku cloud. It is basically a struggle between Mr. Aussie and Ms. USA: who is stronger? Who's level is already priced in? Who has a brighter outlook? Who's outlook is on the verge of a change? We have answered these above, during out fundamental analysis.

 

 

AUDUSD forex trading strategies March 2016 Daily chart range fibonacci market sentiment AUDUSD forex trading strategies March 2016 Daily chart range fibonacci market sentiment

 

 

4- AUDUSD Forex Trading Strategies March 2016

As a savvy Invest Diva student you should already be able to put the two and two together and come up with a trading strategy for the AUD/USD pair. But for our newbies and first time visitors, let me elaborate.

The long term view for the AUD/USD pair hugely depends on a break above or below the 0.71 level.When I say level, I mean the range that we saw in the daily chart, making the pair bounce up and down between 0.73 and 0.69. From a fundamental point of view, Mr. Aussie seems like he could be getting back on his feet, and Ms. USA is also showing sings of strength. That is why the range has been continuing, because neither of these currencies are giving in.

Bearish scenario: We need a weak Mr. Aussie combined with a strong Ms. USA. Technically speaking, a confirmation of a break below the 0.71 level could put the pair back on track with the Double Top formation, signaling a bearish outlook with target set at 0.63.

Bullish scenario: We need a strong Mr. Aussie combined with a weak Ms. USA. A positive Aussie GDP surprise could be the trigger. Or growth of Australia's trading buddy, China. For Ms. USA the dooms day could come if Mr. Trump is elected president.  In that case, a brand new cycle on the monthly chart could be created, forming a head and shoulder pattern on the monthly chart over the next few years.

 

Remember you need to maintain enough margin in your account so a massive move against you won't wipe out your account. These are precisely the stuff I'll teach you in our weekly investing coaching lessons. Here are the important long-term levels to keep in mind for AUD/USD.

Support Levels Turning Point Resistance Levels
0.69 0.71 0.78
0.63 0.73 0.84

 

I'm also looking at Euro, CAD and GBP crosses this week as we may see interesting new developments in their movements, so don't forget to join me for an overview this week.

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