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With the usual Brexit and U.S.-China trade headlines moving the markets, ahead of top tier economic updates from the U.K. soon, GBP/AUD is definitely a pair to watch over the next session or two to see if its latest swing move still has legs.

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
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DJIA: 26314.21 +0.57%
US 10-yr 1.56% +0.021
Bund 10-YR -0.56% +0.037
UK 10-YR: 0.459% +0.043
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Gold: 1513.30 +0.63%
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Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar:

  • Fed Powell takes part in Fed listens event at 4:00 pm GMT
  • FOMC Meeting minutes at 7:00 pm GMT
  • New Zealand Food prices at 10:45 pm GMT
  • U.K. RICS Housing survey at 12:01 am GMT (Oct. 10)
  • Japan Bank lending, Core Machinery orders, PPI at 12:50 am GMT (Oct. 10)
  • Australia Home loans at 1:30 am GMT (Oct. 10)
  • German Trade balance at 7:00 am GMT (Oct. 10)
  • French Manufacturing production at 7:45 am GMT (Oct. 10)
  • U.K. GDP, Trade balance & Manufacturing/industrial production at 9:30 am GMT (Oct. 10)
  • U.S. CPI & Unemployment claims at 1:30 pm GMT (Oct. 10)
  • Canada National house prices at 1:30 pm GMT (Oct. 10)

What to Watch: GBP/AUD

GBP/AUD 1-Hour Forex Chart
GBP/AUD 1-Hour Forex Chart

More Brexit headlines hit the wires to get Sterling moving, and the latest U.S.-China trade news (China open to small trade deal if Trump eases tariff threats) makes the GBP/AUD the pair to watch for the session. The pair is currently trending lower on the one hour chart, a trend that is likely to continue with Brexit sentiment still negative while the possibility of a small trade deal between the U.S. and China has global risks sentiment leaning positive today (usually bullish for the Aussie).

Looking ahead, the likely catalyst for further short-term GBP/AUD volatility is the upcoming U.K. economic updates, most notably the monthly GDP & manufacturing data. Given the recent weakness U.K. manufacturing sentiment data earlier in the month, odds are leaning towards a weak update tomorrow, which may be priced in before/after the event.  We’ve also got Australian and Chinese data ahead as well, but those are most likely to be non-events unless that Australian home loans number reads far away from expectations/previous read.

So, the probability of success is currently in favor of being bearish on GBP/AUD. For conservative traders, watching for a bounce up to the 1.8250 – 1.8300 area makes sense before considering a short position. This is a reachable area given the 150 pip daily ATR, and the possibility of geopolitical news surprising the market at any time to lift volatility. For the more aggressive traders, scaling at current levels up to 1.8300 is an entry strategy that is viable as well given the market themes and upcoming data, but you definitely give up a higher potential return-on-risk when doing so.

The only bullish argument is a technical one as we’re now seeing support forming at 1.8100 with a bullish divergence signal between price and the stochastic indicator. It would likely take a positive Brexit update/U.K. data AND negative trade war developments for a long position to make sense. If that situation did arise, a retest and support at 1.8100 makes sense for an entry from a potential R:R perspective.