The Aussie is set to get moving with the latest monetary policy statement from the Reserve Bank of Australia right around the corner. This event may continue to put the pressure on the Aussie, making the uptrend in GBP/AUD a market pattern to watch for potential short-term opportunities.
Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at the channel pattern on CAD/JPY, so be sure to check that out to see if there is still a potential play!
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Japan Household Spending & Average Cash Earnings at 11:30 pm GMT
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What to Watch: GBP/AUD
We’re keeping it simple today with a textbook technical setup on the one hour chart of GBP/AUD. The pair has been in an uptrend over the past week, breaking major resistance around the 1.8800 handle before topping out between 1.8900 – 1.8950 last Friday.
Since then, the Aussie has been able to claw back from its recent beatdown, but that may just put GBP/AUD in a position that may attract buyers of the recent bullish shift that started mid-November.
That bullish was likely sparked by a bearish turn in the Aussie as the Reserve Bank of Australia restated last month that a rate hike is not likely until 2024. They are likely to reconfirm that notion in the upcoming monetary policy statement, an event that has a high probability of sparking short-term volatility for the Aussie.
With that scenario already priced in, its possible we may see the Aussie actually rally as Aussie sellers take profit on the event. If so, that could bring GBP/AUD back down to the previous swing highs/50% Fibonacci retracement area within a session or two. If the RBA continues to be somewhat dovish on future rate hikes, then we’ll be watching that area for support to form (i.e., bullish reversal candles) before considering a long position.
Now, if we get commentary that the RBA isn’t too worried about the recent pandemic concerns of the Omicron variant and/or that they may hike rates sooner due to excessively high inflation rates, then its possible we may see the Aussie spike higher.
That’s a low probability scenario for sure given that Australia has restricted internal borders once again, but in case we do see it, that surprise should be enough to reverse that bearish move in November, and we’d be looking at a sustained break below the 1.8800 handle as a potential short signal that could draw in more bears and profit takers this week.