Price action is tightening up on GBP/AUD, but that could change quickly with economic catalysts from both Australia and the U.K. ahead.
Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at an upside breakout in AUD/USD, so be sure to check that out to see if there is still a potential play!
Intermarket Update:
| Equity Markets | Bond Yields | Commodities & Crypto |
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DAX: 15119.75 -1.82% FTSE: 6947.99 -2.47% S&P 500: 4152.09 -0.87% NASDAQ: 13389.43 -0.09% |
US 10-YR: 1.62% +0.018 Bund 10-YR: -0.156% +0.005 UK 10-YR: 0.834% -0.001 JPN 10-YR: 0.07% -0.024 |
Oil: 65.36 +0.68% Gold: 1,838.30 +0.038% Bitcoin: $56,609.50 +1.54% Ethereum: $4,062.04 +1.83% |
Fresh Market Headlines & Economic Data:
Nasdaq ends wild day flat after Big Tech reversal, Dow drops 470 points for worst day since February
U.S. job openings hit record high in March
Fed’s Harker sees no reason to withdraw monetary policy support yet
Canada says U.S. ties could be undermined if Michigan shuts pipeline
German investor morale surges as third COVID-19 wave eases
German Wholesale prices in April 2021: +7.2% on April 2020
In March 2021 the seasonally adjusted Italian industrial production index decreased by 0.1% m/m
Upcoming Potential Catalysts on the Economic Calendar
API Crude oil stock change at 8:30 pm GMT
Australia New Home Sales, Building Permits at 1:30 am GMT (May 12)
Japan Leading Economic Index at 5:00 am GMT (May 12)
Germany Inflation Rate at 6:00 am GMT (May 12)
U.K. GDP, Industrial & Manufacturing Production, Trade Balance at 6:00 am GMT (May 12)
France Inflation Rate at 6:45 am GMT (May 12)
Euro Area Industrial Production at 9:00 am GMT (May 12)
Bank of England Bailey speech at 9:00 am GMT (May 12)
What to Watch: GBP/AUD
GBP/AUD hits the top of the watchlist as we’ve got a potential consolidation-break forming on the short-term time frame. We can see the pair has stalled its recent uptrend at the previous swing high around the 1.8050 area, now trading sideways at the moment.
We can see bearish divergence between the price action and the stochastic indicator at the moment, suggesting that traders may take this as a shorting opportunity. The potential target could be the minor area of interest around 1.7925, which is within the daily ATR of around 130 pips, making it reachable within a session or two if momentum picks up.
Of course, the potential next move for GBP/AUD may depend on what we get from upcoming economic updates from both Australia and the U.K. The most notable among the bunch is U.K. GDP and the speech from Bank of England Governor Andrew Bailey. It’s likely that a disappointing read in GDP growth and/or dovish comments from Bailey would draw in GBP/AUD bears both playing technicals and fundamentals.
On the other hand, surprise positive reads would likely turn the above setup into a upside breakout watchlist candidate, especially if Australian housing data disappoints later in the Asia session.
Overall, this is a potential consolidation-breakout setup, so be ready for a move in either direction. And if you’re looking for a pure volatility breakout setup, consider a straddle breakout play, consisting of very small buy orders above market/sell orders below market ahead of the events. Keep in mind that slippage is a big risk with this play, so manage your risk accordingly with small positions and tighter stops.
