Trade Idea: GBP/AUD Retracement Setup

Stronger than expected U.K. data has been propping the British pound up these days so I’m opting for a more conservative entry on this GBP/AUD trade setup.

Short GBP/AUD Idea

In my watchlist entry, I was still trying to figure out whether to jump at the 38.2% Fibonacci retracement level or to be more patient in waiting for a higher pullback. Since U.K. jobs figures have been mostly strong this week, I think the pound could stay supported for a while before the downtrend can resume.

When it comes to monetary policy biases, the BOE is much more dovish compared to the RBA. Governor Carney has mentioned that they’re open to implementing additional stimulus efforts to ensure that the U.K. economy is able stay afloat while the uncertainty surrounding the Brexit is in play. The RBA, on the other hand, seemed more upbeat with their outlook based on their latest meeting minutes.

GBP/AUD 4-hour Forex Chart

GBP/AUD 4-hour Forex Chart

I’m looking at a potential short around the 61.8% Fibonacci retracement level, just below the 1.7300 major psychological resistance and descending trend line. I’ve got my stop set past the swing high and I’ll be aiming for the previous lows initially. Here’s my plan:

Short GBP/AUD at 1.7275, stop loss at 1.7625, PT at 1.6725. I’ll be risking 0.5% of my account on this setup, aiming for a 1.57-to-1 R:R.

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.

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