The Australian dollar continues to be the dog of the currency market
Fresh new lows last week almost certainly guarantee that the ongoing weakness of the Australian currency is here to stay. Further comments from the Reserve Bank of Australia last week underpinned our view that we may eventually see 0.8500 on this pair initially.
Our chart outlines a level that we consider perfect to buy daily puts and that is 0.8730. If we never get there, you might try to buy daily puts below an hourly break of lows at 0.8660. However make sure that this break occurs in liquid market hours, that means wait for the European session on Monday.
There is a ton of factors that are influencing the AUD/USD binary options forex pair to the downside. Starting from lower commodity prices for copper and coal and continuing with the scope for easier monetary policy. The high Consumer Price Index released last week was largely ignored in the end.
This week we will have the Federal Reserve interest rate decision, which is likely to reaffirm the policy introduced in December and taper off further $10 billion from the US central bank's easing program. The most important data feature for Monday would be New Home Sales from the US.
Expect that piece of data at 15:00 GMT with consensus being set at 460,000 new homes sold for the past year on a seasonally adjusted basis. Australia's calendar is empty, since the country is celebrating Australia Day.
That doesn't mean that there won't be trading opportunities around though. Most likely we are going to see substantial volatility in stock markets continuing since the triggers for the latest sell-off in equities lies in the deep waters of Emerging Markets.
The Chinese economy is closely related to the Australian one and the main reasons for the ongoing drop in the currency are jitters on the Chinese money market. It almost looks at this point in time like that market is mirroring what happened in the US in 2008.
Stay vigilant, and for now avoid buying calls, we think it is a very risky thing to do because virtually every key level for a move to the downside has been broken. There is not much on the data front that can stop this fall at least for now. Happy trading!