I’m seeing a neat Fibonacci play on GBP/AUD’s 1-hour forex chart and I’m thinking of hopping in. Do you think fundamentals support a short bias though?
As you can see from the chart below, the pair appears to have found resistance at the broken support level around the 1.9350 minor psychological mark and is on its way back down. GBP/AUD still has a few hundred pips to go before hitting its previous lows near the 1.9000 handle so the risk-reward is looking pretty good even if I short at market.
Even if the technicals are all lined up, what’s holding me back is the downbeat economic bias for Australia. It doesn’t help that recent figures from China have also fallen short of expectations, suggesting further weakness for the Land Down Under. Oh, and Australia is set to print its jobs figures later on this week and a disappointing read is likely.
Then again, data from the U.K. has also been far from impressive and it looks like the upcoming inflation releases today could show more price declines. If so, pound bears could have more reason to add to their short forex positions and eventually push GBP/AUD to 1.9000.
For now, I’m still deciding whether or not to short at market with half my usual risk then to just add to my position if the U.K. CPI comes in weaker than expected. I’ll also watch out for the data dump from China on Wednesday to see if I should be exiting my trade early. What do you think of my plan?
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