The Australian dollar is clawing higher
The Australian dollar has been consolidating in recent sessions as the main direction of the currency on the way higher has been lacking due to geopolitical tensions and the subsequent decline in risk appetite. However with the recovering of sentiment towards the beginning of this week, we might see a broad based rally against the US dollar.
With the main direction of the pair still being up, there are several factors to consider when thinking about the broad based implications of data points on the prices on currency markets. If we look closer at the charts the bullish momentum for the Australian dollar isn't lost and we are very likely to get more upside.
The coming sessions this week are key - with only a single major release from Australia, the main factor will be news from the US - namely CPI tomorrow and the Federal Reserve on Wednesday. However let's get back to the first point about news - the Reserve Bank of Australia will be releasing its monetary policy discussion minutes.
The event is scheduled for 01:30 GMT tonight and could spell two outcomes - either there has been a switch in the bias of the central bank towards higher rates soon, or the policy will reman neutral for the foreseeable future. In our view the latter outcome is more likely and the Australian dollar will sell off mildly on the news.
Our tactics is to buy daily call options in this pair to get closer to a break above the 0.9450-0.9500 area. We are very certain that the activity can be subdued before the Federal Reserve meeting on Wednesday, however we are willing to take the risk.
Buying daily calls is preferred at 0.9350 and continued on a break above the 0.9420 area. We are aiming for the expiry in the 17th of July, Tuesday with this trade, however pending the Federal Reserve meeting more aggressive players can target Wednesday too - as we are not expecting any material change in FED policy.