To kick off the the new trading week and month, I’m looking at a friendly downtrend in GBP/AUD with a bounce that could get me in at a better price for a short-term trade!
GBP/AUD Downtrend Pullback
This is mainly another simple technical setup as GBP/AUD pulls back higher after finding another support area around the 1.6400 handle in a three month trend. The question now is where and when could sellers take interest once again?
Of course, it’s impossible to answer that question, but my best guess is the 1.6800 handle could draw in some sellers as it lines up a few technical resistance arguments, all of which are marked on the chart above:
- Falling highs
- 68% Fibonacci retracement
- Broken previous support area last seen in June
I’m looking to go short in that area on a retest in that area, which I think we’ll likely get there given the slew of top tier events from both Australia and the United Kingdom this week. Hit the links to see what my main man Forex Gump thinks about the potentially volatile and complex catalysts, but we don’t see any major changes or surprises, I’m leaning towards broad risk-on sentiment and interest rate differentials to help keep the downtrend alive after the smoke clears
So, I’m putting short orders up, and because volatility can pick up quite a bit with these events, I’m going with a conservative entry and a wide stop to give me some breathing room and time to assess any potential surprises from the data/policy statements. Here’s what I’m doing:
Short half position GBP/AUD at 1.6800 , max stop loss at 1.7300, target at 1.6000 for a 1:1 return-on-risk potential.
I’ll be risking only 0.5% of my account on this position and with this framework, my potential gain comes out to 1.6:1 return-on-risk, which isn’t bad for a short-term trade. I will cut this trade quickly if there’s something from the BOE or RBA that I don’t like, so stay tuned, good luck and good trading!
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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