It’s looking like the pound might be a better short against the Aussie so I’m adding this GBP/AUD pullback idea to my forex watchlist this week.
Short GBP/AUD Idea
As you can see from the pair’s 4-hour time frame below, price has been trading below a descending trend line connecting the latest highs. A pullback to this falling resistance level could be in the cards so I’ve thrown the Fibs up on the swing high and low.
The 61.8% Fibonacci retracement is closes to the trend line and an area of interest around the 1.7300 major psychological mark. However, a shallow retracement could be possible since stochastic is starting to make its way into the overbought region to suggest that buying pressure is weakening.
Upbeat U.K. CPI readings have resulted to a strong boost for the pound yesterday, which means that traders are paying extra close attention to post-Brexit economic data. For today, the July claimant count change is due so this might also make a huge impact on pound movement. Analysts are expecting to see an increase of 5.2K in joblessness and a larger figure might spur a reversal from sterling rallies.
As I’ve noted in my AUD/JPY watchlist entry earlier this week, I’m bullish on the Australian currency because of its correlation to gold and iron ore prices, both of which have been gaining ground recently. Apart from that, the RBA minutes released this week reflected a relatively upbeat outlook from policymakers, lowering the odds of another rate cut in the coming months.
I’ll keep my one good eye locked on those Fib levels around the 1.7100-1.7300 area and I’ll update you guys on my trade decisions through my Twitter account. As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.