U.K. elections and Australian data continues to drive the GBP/AUD higher, but will the trend continue or end with another round of Australian data ahead of us?
Before moving on, ICYMI, today’s Daily London Session Watch list looked at an opportunity forming on AUD/NZD after weaker-than-expected Australian data, so be sure to check that out to see if there is still a potential play!
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 13082.44 -0.44% FTSE: 7143.16 -0.63% S&P 500: 3108.34 -0.14% DJIA: 27596.63 -0.19% |
US 10-yr 1.803% +0.022 Bund 10-YR -0.293% +0.023 UK 10-YR: 0.775% +0.032 JPN 10-YR: -0.045% -0.006 |
Oil: 58.53 +0.17% Gold: 1482.10 +0.13% Bitcoin: 7386.27 +2.55% Etherium: 147.52 +1.41% |
Fresh Market Headlines & Economic Data:
- China in closecontact with U.S. on trade, urges tariffs cut
- U.S. trade deficit narrows to 1-1/2-year low on weak imports, exports
- US weekly jobless claims drop to seven-month low
- 2019 November Challenger Report: In Penultimate Month, Job Cuts Fall 11%, YTD Up 13%
- UK’s Brexit Party loses four European lawmakers to Conservatives
- German Orders Resume Slide, Defying Hope for Factory Rebound
-
Volume of retail trade down by 0.6% in euro area; Down by 0.4% in EU28
GDP up by 0.2% and employment up by 0.1% in the euro area; In the EU28, GDP up by 0.3% and employment by 0.1% - Euro zone growth curbed by trade, retail sales sharply
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Australia AIG Construction index at 9:30 pm GMT
- Japan Household spending & average earnings at 11:30 pm GMT
- Japan Leading index & Coincident index at 5:00 am GMT
What to Watch: GBP/AUD
After bottoming out around 1.8900 earlier this week, GBP/AUD has been on a heck of a run higher as U.K. polling election continues to suggest a Conservative party lead and as Australia economic data disappointed this week. The move was strong enough to break above strong resistance around the 1.9150 handle, followed by an additional 100 pips run higher from there.
That intra-week trough to peak rally is roughly one full weekly ATR run higher, so the odds are the bulls don’t have much legs left in the run. Stochastic is signaling a similar possibility as we’ve been seeing an overbought ready for the last three sessions. The question now is, are we at another upside breakout point or is it time for the market to pull back?
Well, if you’re a bull on the pair, the argument is that U.K. election polls will continue to signal Johnson’s lead and that the upcoming Australian construction data will disappoint. In that scenario, GBP/AUD looks like a buy from current levels down to the broken resistance area around 1.9150. Keep in mind the daily ATR is around 140 – 150 pips, so that’s easily reachable within a session. A buy in this area improves the potential return-on-risk and since its with the current trend higher, the odds are pretty good of pulling a profit, unless fresh news headlines shakes up sentiment on either currency.
And if you’re a bear on the pair, an argument for a short would be if Australian construction data surprises with a much better-than-expected reading, the Conservative party loses its lead over the Labour party, and/or there is profit taking ahead of the weekend. In that situation, a short between 1.9250 up to 1.9300 is a strong entry candidate that again could yield 75 – 150 pips on the session, especially if there is some weekend profit taking or bullish U.S.-China trade development.
