Forex Trade Idea: Long GBP/AUD

GBP/AUD has been on a monster rally for a while. Maybe this week’s busy forex calendar can help me get in at a great price.

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GBP/AUD 4-Hour Forex Chart

GBP/AUD 4-Hour Forex Chart

A trend doesn’t get any more simple and beautiful as GBP/AUD price action over the last few months.  The reason for the move is mainly the combination of positive sentiment that the BOE will eventually raise interest rates if the UK economy continues to improve, against negative sentiment on a weak Australian economy, accompanied by recent (and potentially further) rate cuts from the RBA this year.  Let’s also not forget Australia’s biggest trading partner, China, is down in the dumps.  This means potentially less trade activity for Australia and a continued hit to in demand commodities like gold (Australia is a large producer of gold).

Technically, the pair is in a solid uptrend and in the past, and we can see slight dips before continuing in the uptrend (pointed out by the blue boxes in the chart above).  With this week filled with top tier events for Australia and the U.K., I think there will be enough volatility to get this pair moving.  And if it’s to the downside, I’d like to take a small nibble at the potential support area around the 100 simple moving average, which is also around 300 – 400 pips away from the recent swing highs (the same distance as previous pullbacks before buyers jumped in). And because of the full calendar, I’ll start off small and look to scale in bigger if the trade does go my way.  Here’s what I am going to do:

Long quarter position GBP/AUD at 2.1100, max stop at 2.0700, adjustment target at 2.01500

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.25% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1:1 for now.  After we get past all of this week’s top tier events, I’ll definitely look to add to my position and trail my stop if the situation makes sense.  My adjustment target is where I’ll make that re-assessment and decision.

Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

  • Mr Pippings

    Looks like a very good setup.

  • Mr Pippings

    Nice continuous trend.

  • Prem Kumar

    “Long quarter position GBP/AUD at 2.1100, max stop at 2.0700, adjustment target at 2.01500”
    Sir what you mean by adjustment target?