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GBP/AUD hits the top of the watchlist to start the week as rate cut speculation puts pressure on the pound and U.S.-China trade news returns as the main market focus.

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Fresh Market Headlines & Economic Data:

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

  • U.S. Consumer inflation expectations at 4:00 pm GMT
  • Japan Current account at 11:50 pm GMT
  • China Trade balance at 3:00 am GMT (Jan. 14)
  • Japan Eco Watchers survey at 5:00 pm GMT (Jan. 14)

What to Watch: GBP/AUD

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

Today we’re checking out GBP/AUD as Sterling continues to draw in more sellers looking to play the possibility of a rate cut from the Bank of England. This was sparked again by another BOE member Vlieghe jumping in on the rate cut talk this weekend. We also got negative economic updates from the U.K. to fuel this speculation today as the latest GDP, trade balance and manufacturing reads came in weaker-than-expected in November.

We’re pairing Sterling with the Aussie dollar which began its recovery last Friday, so there may be momentum there to ride, especially if the upcoming Chinese trade data shows improvement and/or we get more positive updates from the U.S.-China “phase 1” trade story that’s currently pushing up global risk-on sentiment today.

In terms of price action, we’ve already seen a pretty strong move in the past session favoring the bears in GBP/AUD, so if you’re new to getting in short, it might be a good idea to wait for a bounce to the Fib / rising ‘lows’ pattern marked on the one hour chart above of GBP/AUD (1.8880 – 1.8950 area). Of course, shorting at current levels is not a bad idea either if you’re willing to give up some return-on-risk, but you lower the risk of missing a momentum move if there is no bounce.

If you’re a bull on GBP/AUD, catalysts for a long position to look out for would be news of the U.S.-China trade negotiations turning sour, or an argument for a bounce in Sterling would be on profit taking from the recent sell off. A combination of those two would make looking at a long position worth looking at, but for the rest of the session, there’s a low probability that these scenarios would play out.