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Positive risk sentiment continues to driver risk assets higher on the session, and with more catalysts coming from Australia and China, this trend lower in GBP/AUD looks like one to watch for potential pips ahead of the weekend.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on NZD/USD as risk sentiment further moves positive, 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: 12647.18 +3.15%
FTSE: 6252.50 +1.54%
S&P 500: 3147.62 +1.02%
DJIA: 26003.99 +1.05%
US 10-yr 0.678% -0.004
Bund 10-YR -0.429% -0.029
UK 10-YR: 0.191% -0.021
JPN 10-YR: 0.042% -0.007
Oil: 40.31 +1.23%
Gold: 1787.20 +0.41%
Bitcoin:9221.29 -0.28%
Ethereum: 229.66 -0.76%

Fresh Market Headlines & Economic Data:

Record U.S. jobs gain of 4.8 million in June smashes expectations; unemployment rate falls to 11.1%

U.S. factory orders rise for first time in three months

Fed’s Bullard warns of financial crisis risks as virus cases spike, FT reports

Canada exports jump in May, imports down amid supply challenges

Canadian factory activity hints at turnaround in June

Spanish unemployment increases in June by 5,107 people

Italian employment declined -0.4% m/m in May 2020. Unemployment rate rises to 57.6%

Euro area unemployment at 7.4%; EU at 6.7%

In May 2020, Industrial producer prices down by 0.6% m/m in euro area; Down by 0.5% in EU

Brexit: ‘Serious differences’ over trade deal, say UK and EU

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

Bank of England Financial Stability Report at 4:00 pm GMT
ECB Schnabel speech at 5:00 pm GMT
Australia Construction index at 10:30 pm GMT
Australia Services PMI at 11:00 pm GMT
UK Gfk Consumer Confidence at 11:01 pm GMT
Japan Services PMI at 12:30 am GMT (July 3)
Australia Retail Sales at 1:30 am GMT (July 3)
China Caixin Services PMI at 1:45 am GMT (July 3)

What to Watch: GBP/AUD

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

Traders were leaning positive on broad risk sentiment, supportive of today’s watchlist pair: GBP/AUD. The Aussie tends to out perform the British pound in this type of environment, and sentiment may continue for the rest of the session with a better-than-expected U.S. employment update just behind us.

We’ve also got news that the EU-UK Brexit talks break up early over ‘serious’ disagreements, which could bring further pressure to the British pound for the session, and likely support the overall GBP/AUD downtrend.

Looking forward, volatility could pick up with potential catalysts coming from Australian, China, and the U.K. in the upcoming Asia session. The most notable will likely be the latest services PMI data from Australia and China, which will likely follow the recent pattern of business sentiment data improvement over this past week.

So, the odds are in favor of GBP/AUD bears at the moment, and the scenario to watch out for is further moves lower in the pair sparked by the better-than-expected AU & CN data. Shorting from the strong level of interest / major psychological level (1.8100) makes sense on a retest, but only if resistance patterns appear.

For GBP/AUD bulls, the argument for a new position is weak at the moment, but if Australia / Chinese data disappoints (and/or we see a shift in global risk sentiment towards negative) then watch out for a break above the 1.8100 handle. If the market can sustain that break and form bullish patterns, then it makes sense to go for a short-term play given the longer-term downtrend.