As I mentioned in my last trade update, I think my fundamental thesis for shorting GBP/AUD might have been broken after the Bank of England inflation report last week. With the BOE upgrading its economic outlook, and not to mention the weak Australian employment data, I wasn’t loving being short this pair any longer.
Original trade idea: Countertrend Short on GBP/AUD
Early in the Tuesday morning Asia session, we got the RBA meeting minutes, which sparked a positive reaction for the Aussie. They stated that there are signs that a weak currency and easy policy were having an impact, and that interest rates would remain stable. I saw this event as an opportunity to get out with a small win rather than a loss as I see GBP/AUD higher in the short-term.
I think the very positive outlook from the BOE will support sterling against the majors, including the Aussie, and that the original divergence I thought we would start to see in monetary policy between the two central banks isn’t playing out. So, I closed out this position manually at 1.8440.
Total: +60 pips/ +0.10% gain
I could be wrong with price action and this could fall further, but I’ve made it a new rule to not trade against my fundamental bias, especially now that I’m focusing more on longer term trades.
I’ll keep a close eye on this pair as it is technically starting to form a head-and-shoulders pattern on the daily time frame. If it does and breaks below 1.8200, then it’ll be interesting to look at again on the short side for me.
I’ve still got my EUR/JPY short on as well, which I’m also looking to close early. Risk sentiment conditions have changed since my original trade idea as the emerging market scare seems to have faded away.