I’m looking at this textbook break-and-retest setup now that RBA head Lowe signaled scope for further easing and a lower AUD rate.
Think a bounce by GBP/AUD from the Fib levels is due?
Before we look at the setup, here’s a rundown of what happened in the previous session:
Fresh Market Headlines & Economic Data:
- EU leaders reached a deal on Recovery Fund
- Japanese national core CPI unchanged in June vs. projected 0.1% dip
- RBA head Lowe: AUD rate broadly in line with fundamentals
- Lowe: Would like to see lower AUD but will not intervene in the currency market
- Lowe: Still possible to cut rates to 0.10% as inflation could stay low for longer
- RBA minutes: Easy monetary policy to stay as long as needed
- New Zealand credit card spending down 9.2% after earlier 20.6% drop
- Vaccine hopes boost Asian markets again
Upcoming Potential Catalysts on the Economic Calendar:
- Swiss trade balance at 7:00 am GMT
- U.K. public sector net borrowing at 7:00 am GMT
What to Watch: GBP/AUD
This currency pair recently busted through short-term resistance around the 1.8000 level and is in the middle of a pullback.Applying the handy-dandy Fib tool shows that the 38.2% level lines up with this area of interest where more buyers might be waiting. If it holds as support, GBP/AUD could recover to the swing high and beyond. Recovery Fund.
Just keep in mind, though, that risk-on flows have been observed in the earlier session as positive developments in COVID-19 vaccine trials have been reported.
Whichever direction you choose to play, just make sure you check out the average GBP/NZD volatility when you set entries and exits!