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With no potential major catalysts ahead, we’re checking out this momentum move in GBP/AUD for potential short term pips. Will the current bounce draw in more sellers at better prices?

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD’s uptrend, so be sure to check that out to see if there is still a potential play!

Intermarket Snapshot

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Fresh Market Headlines & Economic Data:

U.S. Mortgage applications increased 4.1% from one week earlier

U.S. Existing home sales surge nearly 21% in June – the highest monthly gain on record 

Canada Consumer Price Index (CPI) rose 0.7% on a year-over-year basis in June, up from a 0.4% decline in May. Excluding gasoline, the CPI rose 1.2%.

The advance results for June indicate that Canadian manufacturing sales rose 16.8%.

Britain nears abandoning Brexit trade deal hope

U.S. orders China to shut Houston consulate in move China calls ‘unprecedented escalation’

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

Australia NAB Quarterly Business Confidence at 1:30 am GMT (July 23)

What to Watch: GBP/AUD

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

Today, we’ve got a classic chart pattern forming on  GBP/AUD, a pair that’s been dominated by sellers for the past couple of weeks. And just in the past couple of sessions, the pair made a strong move lower, dropping nearly 400 pips and breaking a strong support area around 1.7930 before bottoming out around the 1.7700 handle.

Now that the pair is bouncing, the question is whether or not forex traders will see it as another selling opportunity at better prices, or is this the start of a fresh leg to the upside?

Well, there doesn’t seem to be a major catalyst ahead that may guide the bias further over the next session, but we do have business confidence data from Australia that may shake up the pair a bit.

For the bears on GBP/AUD, if we see a better-than-expected read on AU business confidence and if global risk sentiment continues to lean positive, watch out for bearish reversal patterns in the Fibonacci resistance area marked on the one hour chart above.

If Stochastic also signals overbought conditions at that time, the odds are better that traders may jump into the pair to play the longer-term downtrend. Also, more news of troubles with Brexit negotiations are likely to push the pair lower.

For the bulls on GBP/AUD, weaker-than-expected AU business confidence data AND a shift to negative in global risk sentiment is the scenario to watch out for before considering a long position.

If we see this play out, traders could take this pair back up to 1.8000 within a session or two (daily ATR is around 140 pips), depending on what may be driving negative risk sentiment.

If the currency pair is retesting the 1.7700 – 1.7750 area before this scenario plays out, then bullish reversal patterns there could draw in traders looking to play swing positions to target 1.8000.