I’ve already locked in my profits for my previous GBP/AUD long position, but I’m keeping a bullish bias on this pair and waiting for a quick pullback to hop in again.
Long GBP/AUD Idea
You’re probably wondering why I closed my earlier long GBP/AUD trade completely instead of building a swing position on the pair… Well, the reason is that I didn’t want to be too greedy (something that has burned me in the past!) on this particular trade, so I went for a reasonable target given the event risks lined up then.
Price did stall at the 1.7000 major psychological level right on the mid-channel area of interest as other buyers likely booked profits there, too. I figured pound bulls might need to summon more strength before being able to sustain a break past that strong ceiling, and a short-term correction might just do the trick.
Applying the Fib tool on the latest swing low and high shows that the 38.2% retracement level is right around a short-term area of interest at 1.6700. Stochastic is indicating overbought conditions on this time frame, though, so profit-taking might be in play for a while.
Sterling also found cause to pause from its climb when BOE head Carney mentioned that part of the reason they’re looking into tightening is that global interest rates have been rising and they’d like to keep up. This may have been disappointing for those who believed that the hawkish bias was spurred solely by strong U.K. fundamentals, but that doesn’t change the fact that the central bank is open to hiking soon.Besides, there’s no denying that U.K. economic reports have been pretty impressive these days, with inflation, employment, and retail sales beating expectations. Brexit risks are still present, but PM Theresa May’s upcoming speech is widely expected to restore market confidence in the British economy’s resilience.
As for the Aussie, downbeat data from China has weighed heavily on this currency, along with the recent slide in iron ore prices. Although it was able to get a bit of reprieve from less-downbeat-than-expected RBA minutes, weak Chinese retail sales and industrial production could have a longer-term impact on Australia’s trade and business activity.
I haven’t set any entry orders yet, but I’m looking at a buy limit around 1.6725 with a stop below the channel support around 1.6300. As for my target, I’ll set my sights on the channel resistance at 1.7700 but I’ll be ready to move my stop to entry once price tests 1.7000 again.
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