[U][B]What is Expected[/B][/U]
Time of release: [B] 01:30 EST, 21:30 GMT 7/3/2007[/B]
Primary Pair Impact : [B]AUD/USD
[/B]Expected: -[B]A$1200M
[/B]Previous: -[B]A$962M[/B]
[U][B]How To Trade This?[/B][/U]
Taking a look at price action in the wake of the previous three Australian trade reports, it is clear that it has an influence on the market regardless of its outcome. In the past, when the data hit the wires, there was a clear hierarchy in which traders compared the actual print to the consensus and then to the previous number.
Beyond simply benchmarking this trade report, there are a few other factories to take into account when preparing for the release. For one, AUDUSD is only slightly off 18-year highs. When fitting this release into the overall trend, it may encounter considerable momentum either from a major retracement or another breakout to new highs. Either would complicate the reaction to the announcement of the deficit. What?s more, this indicator will hit the wires only two hours after an RBA rate decision. Though the central bank is not expected to change the overnight cash rate (and they do not release a statement when there is no change to rates), there could be some relief buying or selling depending on how speculative trade placement develops into the report.
So, when attempting to trade off of the trade balance, a quick diagnostic check should be run on AUDUSD. If the rising trend has already broken too far down or else the pair is already on its way to new highs, a trade off of the physical balance may be obsolete. However, everything else held constant, a deficit that is smaller than the previous month could lead to a quick pop. Since we wait for confirmation from a 5-minute bar before going long, the first few pips will be missed; though the clear follow through from the overall bullish trend should allow for an extended move higher. A stop for the long side should be placed with a modest buffer below the rising trendline. On the other hand, a wider deficit would fight the overall trend; but a five minute that confirms the downside, could open the door to a break of trend.
