Volatility on the rise for AUD/USD

AUDUSD received a boost in its momentum to continue the recent Bull trend last night, just after midnight at 00:30GMT data was released for Australian unemployment. Expectations had been for worse data, instead not only were figures released much better than expected but they were also much better than previous numbers.

The unemployment rate was expected at 6% and was released at 5.8% lower than the previous month at 5.9%. Probably the most striking data was employment change, which represents the number of jobs added. This figure was expected at negative 10 thousand but was actually released at plus 71.4 thousand.

Not surprising then that the AUDUSD rallied from pre‐data levels of 0.7239 to 0.7333 within the space of 18 minutes. It has since been trading in a range and we may expect that to remain so until the Royal Bank of Australia (RBA) monetary policy meeting minutes are published next Tuesday 15th.

The meeting minutes can give insight as to how the board members feel about the economic outlook going forward and the resulting pressure on inflation. At the last meeting on December 1st there had been great anticipation the RBA would lower interest rates. However that did not materialize and the minutes published two weeks later stated stable employment and GDP growth predictions along with inflation pressure as reasons for their decision.

Further volatility may be seen tomorrow after data is released in the US for Retail sales at 13:30GMT and Michigan Consumer Confidence at 15:00GMT. Retail Sales show how active consumers are and account for a large proportion of economic activity. Data for Retail Sales is expected at 0.3% MoM, up from last month at 0.1%. Consumer Confidence is expected at 91.0 with a previous release at 91.3. Higher than expected data for either of those two releases could send AUDUSD back down again at least in the short term.

If you think AUDUSD will continue its recent trend higher then you may buy a Call option, this gives you the right to buy this pair at a preset price (strike) for a preset date (expiry) and for an amount of your choice.

The screenshot below shows that a Call option on AUDUSD with a strike at 0.7305, expiry 7 days and for A$ 10,000 would cost $57.74, which would also be your maximum risk.

This screenshot shows the Profit and Loss profile for the above Call option, which you can see by pressing the Scenarios button.

If you think the AUDUSD will revert to its previous Bear trend then you may buy a Put option which gives you the right to sell AUDUSD at a preset strike, expiry and for an amount of your choice.

The screenshot below shows that a AUDUSD Put option with 0.7290 strike, expiry 7 days and for A$10,000 would cost $62.10, which would also be your maximum risk.

The screenshot below shows the Profit and Loss profile for the above Put option.