My gut tells me that pound pairs could be in for quite a ride today since the U.K. Chancellor will give his Autumn Forecast Statement, and GBP/AUD is at a crossroads before the event.
GBP/AUD Trade Setup
I’m seeing a classic break-and-retest setup on the pair’s 4-hour time frame, as price previously broke below the 1.7000 major psychological level then dipped below 1.6000 before pulling up. Applying the Fib tool on the swing high and low reveals that the 61.8% level lines up with the area of interest and appears to be keeping gains in check for now.
But, as my buddy Big Pippin pointed out in today’s Chart Art, price is also hovering above another area of interest and could be in for a quick bounce off the 1.6750 area. This lines up with a short-term rising trend line that’s keeping bearish pressure at bay.
Earlier today, Australia printed a downbeat reading for its construction work done in Q3 and fears of a capital flight in China owing to the government’s yuan devaluation attempts are restricting the Aussie’s gains. Still, I think the attention could shift to the pound once U.K. Chancellor Philip Hammond takes the stage and discusses how the government plans to keep the economy afloat during its Brexit.
U.K. Prime Minister Theresa May seems to have set the bar high for this Autumn Forecast Statement, citing in her testimony earlier this week that ambitious plans are being made to ensure that growth won’t tank once the U.K. leaves the EU. This could include large cuts to corporate taxes, promises of better trade deals for businesses, and increased investment in research and technology. If these plans are impressive enough, the pound could be able to keep up its climb, but disappointing proposals could allow GBP/AUD to resume its slump.
Depending on how this event fares, I’m looking at a potential short below the 1.6700 handle or a possible long position if price breaks past the 1.700 mark. I’m inclined to think that U.K. government officials will do anything in their power to shore up confidence among the Brits, so I’ve got a slight bullish bias but I’ll be waiting to see how the markets react first.
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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