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AUD/USD EXCHANGE RATE FUTURES

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AU1! trade ideas

The Bear Case for AUD/USD:Capitalizing on Aussie Dollar WeaknessExpressing Our View We expect the AUD to remain weak against the USD, supporting AUD/USD short positions. We believe that the RBA’s tightening cycle is over, supported by rising unemployment figures and moderating inflation. On the other hand, USD should continue to stand tall as Treasury yields climb and the “Higher for Longer” interest rate narrative gains traction. Because of AUD's status as a commodity currency and proxy to China , waning commodity demand and economic woes in China should also limit any meaningful upside for AUD/USD. Barring inflation surprising to the upside, we think that the RBA has no reason to hike rates any further. We favour the hypothetical trade setup below in order to express our view. Short AUD/USD Micro Futures: We favour taking a short position with entry at the present level of 0.6476, target level at 0.6200, and stop loss above 0.6500 psychological resistance at 0.6550. Losses in AUD/USD could accelerate once monthly low at 0.6370 is breached. The contract may head towards the October low of 0.6200- which coincides with a fundamental backdrop with US 10Y yields above 4.2% and factory protests in China. This setup delivers a reward: risk ratio of 3.73x. • Entry Level: Present level of 0.6476 • Target Level: 0.6200 • Stop Loss Level: 0.6550 • Reward: Risk Ratio: 3.73x
CME_MINI:M6A1!Short
by phillip_nova
Aussie Dollar: Headwinds AheadAUD is a commodity currency. Australia’s resources rich economy is heavily influenced by commodity trade, particularly with China. When China sneezes, the AUD catches cold. With the Reserve Bank of Australia (RBA)’s rate hiking cycle approaching an end plus China’s economic recovery remaining anaemic, the AUD is likely to weaken further in the short term. This paper posits a short position in CME Micro AUD/USD futures to gain from a weakening Australian Dollar with an entry at 0.6584 combined with a target exit at 0.6300 hedged by a stop loss of 0.6747 delivering a reward to risk ratio of 1.75x. RBA HAS PAUSED ITS INFLATION FIGHT Fending off a stubborn inflationary environment, the RBA was quick to follow the Fed’s path in raising its lending rates to cool the economy. While not as aggressive as the Fed, the RBA held its rates at elevated levels. Inflation in Australia has eased from its peak but hovers above those in the US. The RBA expects inflation to abate gradually to target levels of 2% by mid-2025. With inflation trending lower and GDP softening, the RBA rate hiking cycle is likely at its apex. The RBA did not hike rates at its last two meetings. Much like other central banks, the RBA will be guided by macroeconomic data in shaping the path ahead for interest rates. Thus far, economic data supports the case for no further rate hikes. Consumer spending and GDP growth has slowed over the last two quarters. Barring an unexpected reversal, the rates are at their peak. Sharp retail slowdown in June also vindicates RBA’s case for pause. Still, the odds of further rate hikes are non-zero. The RBA has maintained a hawkish tone stating that further tightening may be warranted. Previously, even though RBA had opted for a pause in April, scorching inflation numbers forced the central bank to hike rates in May & June. RBA’s next policy meeting is on September 5th and until then, the current bearish sentiment is likely to prevail. If RBA opts to continue with the rate pause, AUD is likely to weaken further. US DEBT DOWNGRADES AND THE DOLLAR SMILE Fitch, a leading ratings agency, recently downgraded US treasury debt. The downgrade has led to limited impact on treasury yields or the USD. Instead, the downgrade led to reduced appetite for risk assets and increased flow into the safety of the US Dollar. This is the classic dollar smile phenomenon at play. The dollar smile helps explain the tendency of USD to shine when the US economy is not only strongly outperforming, but also when it faces turbulence. This bodes negatively for the AUD which is a volatile currency as it takes cues from global commodities. Reduction in risk appetite leads to further weakening in the AUD. UNDERWHELMING CHINESE ECONOMIC RECOVERY China is Australia’s largest trading partner. Australia is a resource rich nation. Substantial portion of its resources are exported to China. Iron Ore, Copper, and Natural Gas top the list. Consequently, a slowdown in China adversely impacts the Australian Dollar. China’s post-COVID recovery has been underwhelming. Growth is weaker than expected and domestic consumption remains fragile. Though there are signals that these may rebound, the process will be slow which suggests there will be limited demand from China for Australian commodities in the near term. Inadequate Stimulus China has not been able to rely on external demand for its goods to support its recovery. This has put further pressure on stimulating domestic demand. Last week, Chinese officials announced stimulus measures which have fallen short of expectations. Officials have indicated further stimulus, but details remain scant and timeline vague. Given that, Chinese economic recovery is likely to be drawn out. Feeble Manufacturing Activity Manufacturing forms the backbone of the Chinese economy. Activity in the sector had been shrinking since February. However, the latest PMI data points to a slow reversal in this trend. Inventory levels improved suggesting that de-stocking is ending. However, PMI at 49.3 still points to shrinking manufacturing activity which may take several months to recover as global demand remains pale. OPTIONS MARKET SIGNALS SIGNIFICANT NEAR-TERM BEARISHNESS Aggregate Put/Call ratio of CME Options on AUD futures stands at 1.74 indicating a clear bearish sentiment heavily weighted towards the front of the curve. Analysing ratio across expiries, sentiment is overwhelmingly bearish in the near term with signs of bullishness in Q4. Meanwhile, CFTC’s Commitment of Trader’s report shows that asset managers are positioned net short on the AUD and increased net short positioning by ~9000 contracts (~21%) last week. Conversely, leveraged funds have switched their net short positioning to net long last week. Overall, COT points to a bearish sentiment. TRADE SETUP With Australian interest rates at their peak and Chinese economic recovery expected to be drawn out, investors can gain from the near-term weakening in the AUD using a short position in CME’s Micro AUD/USD futures expiring in September. CME Micro AUD/USD Futures have a margin requirement of just USD 170 (as of August 7th) and provides exposure to 10,000 AUD. Every pip delivers a P&L of USD 1. • Entry: 0.6584 • Target: 0.6300 • Stop Loss: 0.6747 • Profit at Target: USD 284 (284 pips * USD 1 = USD 284) • Loss at Stop: USD 163 (163 pips * USD 1 = USD 163) • Reward-to-Risk Ratio: 1.75x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME_MINI:M6A1!Short
by mintdotfinance
1
AUDJPY - Short-Term Bullish ExpectationThis is a combined chart using the Futures contract for the Aussie and the Yen This expectation is a framework to look for a potential trading setup; I don't just execute based on these levels, I always wait for confirmations on lower timeframes This Analysis was done using my complete Strategy which includes: - Smart Money Concepts - Multi Timeframe Liquidity and Market Structure - Supply And Demand - Auction Theory - Volume Analysis - Footprint - Market Profile - Volume Profile - WYCKOFF - ETC
CME:6A1!Long
by SmartMoneySource
Momentum Divergence in the Aussie Dollar, and a textbook set-upThese trade ideas I learned from watching Linda Raschkes work, and playing with the concepts my self. I want to get better at spotting these set-ups in the wild as opposed to cherry picking them after the fact. If you are looking to learn more about the concepts I discuss in this video, I recommend you find Linda's youtube channel, and study her library of videos,.I have picked up little nuances on these concepts from each one. Specifically, her videos on momentum oscillators, taylor trading, and acclerating your evolution as a trader cover the nuts and bolts of what I discuss here. I also think her book Street Smarts is a must read if you do decide that this style of trading is interesting to you.
CME:6A1!Short
by outlier1500
Aussie Dollar - Don't Worry Be Hoppy!China re-opening, widening trade surplus, and a fragile USD to keep Australian Dollar bouncing higher ("AUD") in 2023. The Dollar Index (“DXY”) is sinking through support levels even as the AUD rises past key resistance points. Amid solid tailwinds favoring AUD and formidable headwinds facing the USD, this case study argues for a long position in CME Micro AUD/USD Futures expiring in March 2023. Thus far, the AUD is 2023's top-performing currency. It appears to have raced ahead of itself with near-term consolidation expected before resuming its ascent. Hence, an entry at 0.695 with a target of 0.736 and a stop-loss at 0.668 will deliver a reward-to-risk ratio of 1.52. WHAT DRIVES THE VALUE OF A CURRENCY? Supply and demand for a currency establishes its value. Monetary policy also has an impact on its value. Currencies with high domestic interest rates appreciate while those with lower rates get weaker. Nations enjoying greater trade surplus command a stronger currency. Currencies in high demand for savings, trade settlement, tourism, and education also appreciate. AUD, as a commodity currency, enjoys multiple tailwinds, making it resilient going into 2023. Economic re-opening in China after a shift away from zero-covid stance is expected to increase demand for commodities. Easing political relations saw China secure its first Australian coal cargos in two years. Bullish commodity prices will boost AUD. Australia's trade surplus widened to $13.2B in November when it was expected to decline to $10.5B. Growing trade surplus bodes well for AUD. China re-opening and easing political relationships benefits Australia in more ways than one. Chinese travelers and students are starting to return to Australia further boosting demand for its dollar. AUSTRALIA IS A TOP COMMODITY EXPORTER MAKING AUD A COMMODITY PLAY Australia produces copious quantities of crude and three-fourths of that is exported. Australia is one of the planet’s largest exporters of iron ore and coal. Iron Ore forms the single largest source of export revenue worth AUD 133 billion in 2021-22 according to Mineral Council of Australia. Australia also exports aluminum. As seen in the chart below, correlation between CME Iron Ore Futures prices to CME Micro AUD/USD Futures is tight at upwards of 90% and tends to move in tandem. Bullish Iron Ore prices augur well for the AUD. CHINA IS AUSTRALIA’S NUMBER ONE TRADING PARTNER More than half of every commodity is imported into China. It should be no surprise that China is Australia’s top trading partner. Importing more than USD 100 billion of Australian products, China accounts for more than 30% of all Australian exports. China is the world’s largest steel producer for which Iron Ore is a key ingredient. Predictably, China accounts for 80% of Australian Iron Ore exports. China is expected to remain a key producer and consumer of steel as its One Belt One Road requires huge investments in steel-intensive projects both within and outside its borders. RBA TO REMAIN HAWKISH IN FENDING OFF DOMESTIC INFLATION Australian inflation eased to 6.9% in October 2022 but shot back up to 7.3% in November beating expectations. The Reserve Bank of Australia (“RBA”) remains hawkish in the fight against inflation as it wrestles to bring inflation down to the 2%-3% target. Economists anticipate that it might take a quarter or two before reaching “peak-inflation” in Australia. Meanwhile, RBA will keep or lift rates higher which will strengthen AUD even more. KING DOLLAR SHEDS ITS SHINE The US Dollar Index (DXY) measures the US dollar’s value against a basket of six currencies comprising of Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and the Swiss Franc. The USD rallied strongly in 2022 while investors’ flight to safety tendency demonstrated dollar’s heft as the global reserve. However, the DXY has shed 11.2% since touching a high of 114.778 on September 28 to close at 102.204 on January 13, 2023. Slowing inflation in the US is expected to ease the Fed’s hawkish aggression towards rate hikes. This will force the dollar to further lose its value against other currencies. Anticipating this, asset managers have reduced their net long positions in the DXY by 45% over the last twelve weeks while leveraged funds continue to entrench their net short positions by 3% during the same period. TECHNICALS POINT TO AUD BULLS AND DXY BEARS On January 6, AUD pushed past the 20-day moving average it has tested since December 27. The Bollinger Bands having narrowed until then is now broadening out with the AUD breaking out to the top. With the AUD trading around the Pivot point, it is now trending up and has traded past the first key resistance on January 12. Mirroring the same trend but to the reverse, the DXY attempted to rally past the 20-day moving average, but only to fail and sink below the immediate support at 102.643. The Bollinger band having narrowed until January 6 has given way with the DXY breaking out downwards shedding more than 2% with five daily red candles in succession. A bull in AUD and a bear in USD creates a compelling backdrop for a bouncy AUD in the near term. In vindicating this sentiment, the options open interest in CME Micro AUD/USD Futures shows a put-call ratio of 0.83 pointing to bullish view among options market participants. TRADE SET-UP Each long position in CME Micro AUD/USD Futures (March 2023) provides exposure to AUD 10,000. If AUD moves by 0.0001 point, the Micro AUD/USD future moves by $1. Entry: 0.695 Target: 0.736 Stop Loss: 0.668 Reward/Risk Ratio: 1.52 Profit at Target: $410 Loss at Stop Loss: $270 MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. This material has been published for general education and circulation only. It does not offer or solicit to buy or sell and does not address specific investment or risk management objectives, financial situation, or needs of any person. Advice should be sought from a financial advisor regarding the suitability of any investment or risk management product before investing or adopting any investment or hedging strategies. Past performance is not indicative of future performance. All examples used in this workshop are hypothetical and are used for explanation purposes only. Contents in this material is not investment advice and/or may or may not be the results of actual market experience. Mint Finance does not endorse or shall not be liable for the content of information provided by third parties. Use of and/or reliance on such information is entirely at the reader’s own risk. These materials are not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Mint Finance to any registration or licensing requirement.
CME_MINI:M6AH2023Long
by mintdotfinance
10
AUSTRALIA DOLLAR Futures (6A1!), H4 Potential for Bearish DropType: Bearish Drop Resistance: 0.69610 Pivot: 0.68560 Support : 0.67920 Preferred Case: On the H4, with the price moving below the ichimoku cloud, we have a bearish bias that the price may drop from the pivot at 0.68560, which is in line with the swing low and 61.8% fibonacci retracement to the 1st support at 0.67920, where the 78.6% fibonacci retracement , 78.6% projection and previous swing high are. Alternative scenario: Alternatively, price could rise to the 1st resistance at 0.69610, where the overlap resistance and 38.2% fibonacci retracement are. Fundamentals: Construction Work Done q/q, showing -3.8%, dropped significantly from last period and forecasted, which has negative impact on overall employment and spending.
CME:6A1!Short
by Genesiv
Potential Bullish ContinuationTitle: AUSTRALIAN DOLLAR FUTURES (6A1!), H4 Potential for Bullish Rise Type : Bullish Rise Resistance : 0.69555 Pivot: 0.68620 Support : 0.68100 Preferred Case: On the H4, with prices moving above the ichimoku indicator and breaking out of the descending channel , we have a bullish bias that price will rise from the pivot at 0.69295 where the overlap support is. If price breaks above the intermediate resistance at 0.69830 at the swing high in line with the 78.6% fibonacci retracement, we will have upside confirmation that price will continue to rise to the 1st resistance at 0.70705 in line with swing high. Alternative scenario: Alternatively, price may break pivot structure and drop to the 1st support level at 0.68600 in line with the overlap support. Fundamentals: Following Gov Lowe’s comments regarding an expectation for inflation to reach 6 to 7% and the requirement for further interest rate increases, we have a bullish bias on the Australian Dollar.
CME:6A1!Long
by Genesiv
AUSTRALIAN DOLLAR FUTURES (6A1!), H4 Potential for Bullish RiseType : Bullish Rise Resistance : 0.69555 Pivot: 0.68620 Support : 0.68100 Preferred Case: On the H4, with prices moving above the ichimoku indicator and breaking out of the descending channel , we have a bullish bias that price will rise from the pivot at 0.68620 where the overlap support is to the 1st resistance in line with swing high resistance and 127.2% fibonacci extension . Alternative scenario: Alternatively, price may break pivot structure and drop to the 1st support level at 0.68100 in line with the pullback support, 61.8% fibonacci projection and 50% fibonacci retracement . Fundamentals: Following Gov Lowe’s comments regarding an expectation for inflation to reach 6 to 7% and the requirement for further interest rate increases, we have a bullish bias on the Australian Dollar.
CME:6A1!
by Tickmill
AUSTRALIAN DOLLAR FUTURES (6A1!), H4 Potential for Bullish RiseType : Bullish Rise Resistance : 0.69555 Pivot: 0.68620 Support : 0.68100 Preferred Case: On the H4, with prices moving above the ichimoku indicator and breaking out of the descending channel , we have a bullish bias that price will rise from the pivot at 0.68620 where the overlap support is to the 1st resistance in line with swing high resistance and 127.2% fibonacci extension . Alternative scenario: Alternatively, price may break pivot structure and drop to the 1st support level at 0.68100 in line with the pullback support, 61.8% fibonacci projection and 50% fibonacci retracement . Fundamentals: Following Gov Lowe’s comments regarding an expectation for inflation to reach 6 to 7% and the requirement for further interest rate increases, we have a bullish bias on the Australian Dollar.
CME:6A1!
by Tickmill