It looks like I may have already missed the boat on my earlier CAD/JPY forex setup so I’m turning to this potential long-term reversal on GBP/AUD instead. Now I’m not quite sure if this is a high-probability setup since the technicals look neat but I’m a bit iffy on the fundamentals. Care to share your thoughts on this one?
As you can see from the chart below, the pair already broke below the long-term rising trend line visible on the 4-hour forex time frame. In addition, a double top has formed right at the peak of the uptrend and price seems to have broken below the neckline as well.
Stochastic is pointing up, though, which means that a retest of the broken trend line and neckline might be in the cards. I’m seeing a bit of bullish divergence too, as price made lower lows while the oscillator made higher lows. Could this mean that the breakout was a fake out?
Fundamentals are a little tricky since the U.K. just painted a mixed picture of its labor market with its August jobs report. While the economy added fewer than expected jobs during the month, the unemployment rate still ticked down from 5.6% to 5.5% while the average earnings index showed a faster pace of increase at 2.9%. Inflation readings from the U.K. have been in line with expectations, but both the headline and core CPI indicated declines. Meanwhile, the RBA minutes sounded a bit cautious, as policymakers said they’ll be waiting for upcoming data to see if any rate adjustments need to be made.
I guess I’ll just take a page from the RBA’s book for now and be on the lookout for more economic data that could signal where monetary policy might be headed next. Aside from that, I’ll also be paying close attention to gold prices and other commodity trends that could be affected by the FOMC statement this week. I’ll keep y’all posted!
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