Daily U.S. Session Watchlist: GBP/AUD

Price action in GBP/AUD has tightened up to form a potential breakout opportunity ahead of top tier Australian & Chinese data ahead.

Before moving on, ICYMI, today’s Daily London Session Watch list looked at an opportunity forming on AUD/USD on a possible trend reversal, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

Fresh Market Headlines & Economic Data:

• ADP National Employment Report: Private Sector Employment Increased by 202,000 Jobs in December
• Central Banks Are Nearing Policy Limits, Bank of England’s Carney Says
• UK House prices in December were 4.0% higher than in the same month a year earlier
• Full UK-EU trade deal ‘impossible’ by deadline – von der Leyen
• New orders in German manufacturing had decreased in Nov. 2019 a seasonally and calendar adjusted 1.3% on the previous month
• French foreign trade deficit reached 5.4B euros in November 2019 against 5.3B in October
• BOJ to nudge up growth forecast on boost from fiscal package: sources

Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:

• U.S. Consumer credit change at 8:00 pm GMT
• Japan Foreign investment at 11:50 pm GMT
• Australia Trade balance at 12:30 am GMT (Jan. 9)
• China Inflation at 1:30 am GMT (Jan. 9)

What to Watch: GBP/AUD

GBP/AUD 1-Hour Forex Chart

GBP/AUD has been another one-way mover on recent weakness in the Australian dollar, but it seems that the bulls have run into a roadblock over the last session. Volatility dipped on Tuesday and it seems we now have a tight consolidation pattern between the 1.9070 – 1.9150 levels (tighter than the daily ATR of around 150 pips), forming what is usually an easy-to-spot breakout setup on the one-hour chart.

Volatility may pick up once again with the upcoming Australia trade balance and Chinese inflation data coming soon, and geopolitical news is always on the table as more actions could be taken by the U.S. or Iran in the current kinetic scenario between the two. We may actually see a catalyst soon on that front as U.S. President Trump will be addressing the U.S.-Iran situation shortly.

For GBP/AUD bulls, the momentum is currently in your favor for an upside breakout, which may occur if we get hints of more military action (likely to push negative risk sentiment higher), and/or disappointing Australia or Chinese data. Positive Brexit developments would also likely help in this scenario, but there are no scheduled events related to that theme coming out for the rest of the session. In these scenarios, an upside break of the 1.9150 handle should be an alert to get interested with a possibly break-and-retest or straight breakout entry strategy in mind given the upside bias.

For GBP/AUD bears, a halt in military action between the U.S.-Iran could continue to raise positive global risk sentiment, and/or better-than-expected Australian / Chinese data could lift the Aussie short-term. If a downside break of the consolidation occurs with this scenario, then it’s likely time to consider a short-term sell position on GBP/AUD, especially if more negative Brexit rhetoric (e.g., Full UK-EU trade deal ‘impossible’ by deadline – von der Leyen) comes out to put pressure on Sterling.