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Checking out this swing setup on GBP/AUD this week after Sterling pops higher on BOE comments. Is this an opportunity for the bears to take back control once again?

GBP/AUD Fib Short Setup?

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

We saw a strong pop in the British pound on the session against the majors, likely sparked by comments from Bank of England Governor Andrew Bailey that toned down the speculation of negative interest rates coming for the U.K. 

Short-term, this is indeed bullish for Sterling as we witnessed this session, but longer-term, Brexit transition uncertainty and COVID lockdowns will likely continue to keep the pressure on GBP.

Today’s rally in GBP/AUD may be an opportunity to play the longer-term trend lower in the pair, and with the Aussie still beating out the rest of the majors in the new year, it’s likely the best currency to play expectations of further weakness in Sterling, at least until we get new catalysts that shift overall sentiment.

So if you’re a bear on GBP/AUD, shorting around the Fibonacci retracement area / broken support-turned-resistance area may be an attractive place to get bearish, especially with Stochastic signaling short-term overbought conditions.

And using the other side of the Fibs/broken support as a tight stop guide, the potential return-on-risk is pretty strong, even if just targeting the previous swing lows around 1.7420.

But keep in mind too that the 1.7500 area is a major support area, so things could get sloppy in GBP/AUD for now, making scaling in entry strategies something to consider to improve your overall entry price.

It can also get pretty nasty for the bears too if global risk sentiment flips towards negative, a fear that seems to be growing in the financial markets as bond yields rise and COVID cases continue to spike in the wrong direction.

What do you all think? Are you watching GBP/AUD for a potential trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.