Most pound pairs are stuck in tight consolidation patterns on their longer-term time frames, but I think we could be in for an upside breakout on GBP/AUD with the RBA decision coming up. Take a look at my trade idea!
GBP/AUD Trade Idea
I’m seeing a cross between a symmetrical and descending triangle pattern on the pair’s daily time frame, and price is already approaching the peak of the formation so a breakout might be due. Stochastic has been on the move down but is turning higher once more to indicate that buyers are still putting up a fight.
If it does break higher, GBP/AUD could climb by an additional 1,800 pips or the same height as the chart formation. However, there are plenty of nearby areas of interest so I’ll probably aim for a smaller profit target.
Since economic reports from Australia haven’t been so upbeat lately, particularly when it comes to retail sales and trade, I’m thinking the RBA announcement might not sound so optimistic this time around. The central bank already signaled that they don’t plan on cutting rates again anytime soon so market watchers are turning their attention to how long the RBA might keep sitting on its hands.
Meanwhile, the pound has been holding on to its gains on the lack of Brexit-related jitters so far. Economic data hasn’t been so upbeat either as the manufacturing PMI fell from 54.5 to 54.2 instead of improving to the projected reading at 55.1. Construction and services PMIs are still lined up for the next couple of days and any upside surprises from these reports could boost the pound.
I haven’t set any entry orders yet since I’m planning on waiting for more confirmation from the RBA statement or U.K. PMI readings. I’m eyeing a potential buy stop order above the 1.6600 handle with a stop around 1.6300 and aiming for the next area of interest close to the 1.7200 mark as my initial profit target for a 2:1 trade.
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See also: Q4 2016 Trading Performance Review
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