(By Mike Kulej) While the Euro and Euro-related developments will certainly remain in focus this week, the Australian Dollar could also be a subject of increased interest. The Reserve Bank of Australia holds its policy meeting on Tuesday, while the employment numbers will be released on Thursday. Both events typically create increase activity in the AUD and this time should be no different. Because what happens in the Aussie in early trading often sets the tone for the rest of the day, everybody should pay attention to these events.
Meanwhile on Friday the US Dollar took serious beating, especially after the NFP Report. To be sure, the employment data is not as rosy as the 163 K reading suggests. After all, the official Unemployment Rate increased to 8.3%. In addition, the proportion of Americans who were either unemployed, working part-time because they could not find full-time work or too discouraged to look for work rose to 15% from 14.9% in June. Thus, one could argue that the real unemployment is much higher than what is reported. Still, markets liked what they saw on Friday and staged strong rallies versus the Dollar and the Yen.
In case of the AUD-USD, this amounted to about 130 pips gain, pushing the price to about 1.0570, close to the earlier high of 1.0580. Because this pair closed near the daily extreme and in neighborhood of established resistance level, chances are high for a short-term reversal here. The premise is simple, going short the AUD-USD on a bearish candlestick on a daily chart. Exact numbers will have to be worked out once the situation develops, but I will be looking for about 40 pips gains here. Have a great trading week!