Spotted a textbook triangle pattern on GBP/AUD and with a busy forex calendar for the U.K., looking for a breakout trade this week.
I like a triangle breakout on GBP/AUD this week because there are a few potential catalysts coming up on the forex calendar this week, especially for the British pound. The catalysts of note are the upcoming inflation data from the U.K. on Wednesday and the U.K. retail sales data on Thursday. The inflation data is forecasted to come in pretty mixed, while the retail sales data is expected to go negative month-over-month in October, so the odds are more in favor of the British pound moving lower on the week. On the other side of the pair, we’ve got events from Australia going into the Wednesday session, but since they’re all lower tier, it’s likely they won’t have a big effect on volatility or directional bias.
So, what I’m looking for in a short-term trade is a break of the rising trendline before going in, with a wide stop above the recent highs incase there is an upside breakout, and my target is the October lows, creating a favorable risk-to-reward setup. Here’s what I’m doing:
Short half position GBP/AUD at 2.1300, max stop at 2.1650, profit target at 2.0800
I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.42:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly (including a manual stop) if necessary. Stay tuned!