How to trade initial jobless claims... via AUDJPY
I'm a big fan of AUDJPY due to its risk sensitivity.
In a risk on environment, it turns bid, and in a risk off environment, it goes offered.
Why?
Well AUD is a high beta currency and is rarely offered in a carry trade (until more recently against some exotics).
Whilst Yen is almost always offered in the carry trade.
This is due to the negative rates that the BoJ have imposed for years now, whilst the AUD is very sensitive to demand, especially from China.
What does this mean?
Well, when risk goes off, that carry trade has to unwind.
We saw the Euro rally recently because of this too.
Investors had borrowed in the lower yielding currency to earn carry (interest) in the higher yielding ccy.
If we consider that these initial jobless claims are meant to be, to put it frankly, really bad, we can build a picture as to where AUDJPY will go based on the further unwinding of positions that needs to take place.
Take a look at the chart.
Yesterday's daily candle from a technical perspective looks extremely bearish.
These jobless claims are going to be massively important, since it's the first guide to how badly affected the US economy has been from the consumer's standpoint.
Bank of America have 3.1mm as an estimate while Citi are saying 4mm.
I am personally closer to Citi's estimate here.
It could be a good idea to sell AUDJPY, taking 25% off at the first target at 63.00/62.80 and then another 25% at 60.00 as we progress over the coming days to weeks.
Good idea to trail a stop at the prior day's ATR at target 1 and then do the same at target 2 with a hard stop back above target 1 to negate the whole position.
In a risk on environment, it turns bid, and in a risk off environment, it goes offered.
Why?
Well AUD is a high beta currency and is rarely offered in a carry trade (until more recently against some exotics).
Whilst Yen is almost always offered in the carry trade.
This is due to the negative rates that the BoJ have imposed for years now, whilst the AUD is very sensitive to demand, especially from China.
What does this mean?
Well, when risk goes off, that carry trade has to unwind.
We saw the Euro rally recently because of this too.
Investors had borrowed in the lower yielding currency to earn carry (interest) in the higher yielding ccy.
If we consider that these initial jobless claims are meant to be, to put it frankly, really bad, we can build a picture as to where AUDJPY will go based on the further unwinding of positions that needs to take place.
Take a look at the chart.
Yesterday's daily candle from a technical perspective looks extremely bearish.
These jobless claims are going to be massively important, since it's the first guide to how badly affected the US economy has been from the consumer's standpoint.
Bank of America have 3.1mm as an estimate while Citi are saying 4mm.
I am personally closer to Citi's estimate here.
It could be a good idea to sell AUDJPY, taking 25% off at the first target at 63.00/62.80 and then another 25% at 60.00 as we progress over the coming days to weeks.
Good idea to trail a stop at the prior day's ATR at target 1 and then do the same at target 2 with a hard stop back above target 1 to negate the whole position.
FREE 100+ page bond trading guide! pro.fink.money/subscribe