The AUD/USD has failed around 0.7200 for the second straight day despite unambiguously good news.
China growth data came in better than expected on Wednesday and augers well for key commodities, emerging markets and global growth nL3N21Z0IO.
In the past a strong beat on China data would have sent the AUD/USD trending higher.
Today the Australian employment data broadly exceeded forecasts nAZN0QDS00, just two days after the RBA minutes implied they would only consider easing policy if the unemployment rate started trending higher nL3N21Y0QX. After a brief spike to 0.7200, the AUD/USD is settling around 0.7270-75 – exactly where it started the week.
Either the market has it wrong and the AUD/USD is a screaming buy, or the lack of upside on good news is setting the AUD/USD up for a large fall once the news flow turns negative.
With option vols near record lows, the stage is being set for a significant breakout, but it might not come for a while.
Perhaps the best strategy is to play the 0.7000-0.7300 range and go with the direction of the inevitable break of that range.
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