Strong New Home Sales Keeps Greenback Bullish

Strong New Home Sales Keeps Greenback Bullish
April 26, 2018

 
The AUDUSD pair has been on a consistent decline since January 2018. The US benchmark interest rate of 1.75% is now higher than the prevailing interest rates in Australia. Furthermore, Trump’s trade war with China and pressure on commodity prices is taking a toll on the Aussie. We expect the AUDUSD pair, which is currently trading at 0.7600, to decline further due to reasons given below.

The price of seaborne coking coal fell sharply this week, after two cargoes were sold in China at prices steeply lower than previously agreed levels. The premium coking coal was sold at $185 CFR China, representing a $10 decline from the price traded last week. Both cargoes were from Australia.

Likewise, the price of iron ore (62% fines) fell to $67 per tonne, down from about $85 per ton in early March. Other lower grade iron ores were also under tremendous selling pressure. 58% fines were traded at about $39. Iron ore and coking coal are two main export products of Australia.

In the US, the Conference Board Consumer Confidence Index rose to 128.7 in April, from 127.70 in March. Analysts had expected the Consumer Confidence, to decline to 126. The survey is conducted by Nielsen for The Conference Board. The Expectation Index rose to 108.1 this month, from 106.20 last month. Likewise, the Present Situation Index improved to 159.6, from 158.1.

Another most sought-after data by traders, new home sales, was published by the Commerce Department on Tuesday. The report indicated that new home sales grew 4% to an annual rate of 694,000 units last month. The seasonally adjusted data were better than 625,000 units anticipated by economists.  Furthermore, the Commerce Department upwardly revised February’s new home sales of 618,000 units to 667,000 units. January’s data were also revised to show unchanged sales, instead of declining. The upbeat data from the US is expected to keep the greenback bullish against the Aussie.

The AUDUSD pair is trading below its 50-day moving average. Furthermore, the currency pair faces major resistance at 0.7670. The next major support for the currency pair is only at 0.7430. The oscillator of moving average is moving deeper into the negative territory. Therefore, we can expect the currency pair to remain bearish.

AUDUSD - Technical Analysis - 26th April 2018

By going short in the AUDUSD pair, we are planning to gain from the probable decline. We prefer to establish a short trade near 0.7600, with a stop loss order above 0.7690. Once the trade is opened, we would place an order to book profit near 0.7450.

Additionally, in the binary market, we wish to buy a put option when the AUDUSD pair trades near 0.7600. We will choose an expiry date near May 4th for the option contract, while placing the order.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

 

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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