Sterling has a few event risks lined up this week, so I’m sticking to pound pairs with yet another potential pullback play. Take a look!
Long GBP/AUD Idea
I seem to have missed my chance to catch the GBP/CAD uptrend I was watching last week because had second thoughts about shorting the Loonie while oil was on a tear.
I’m turning my attention to another pound cross this time, with GBP/AUD just priming for a correction to its own ascending trend line support. As with my classic break-and-retest setups, this potential floor lines up with an area of interest and Fib levels.
I’m eyeing an entry around the 50% Fib or the 1.7250 minor psychological level as price could still dip to this area with the Treasury’s Autumn Forecast Statement comin’ right up. This could bring in some volatility for pound pairs as Finance Minister Hammond is expected to factor Brexit in their estimates.
Nonetheless, I’m keeping a bullish bias on the currency as economic data has been mostly upbeat and the BOE is still likely to tighten in the coming months to keep inflation in check.
On the other hand, I’m Aussie bearish after the RBA minutes emphasized that they’re not looking to hike anytime soon. In particular, policymakers expressed concerns about wages, inflation, and consumption.
I haven’t set any entry orders yet since I plan on waiting for the GBP event risks to play out before deciding to hop in. In any case, I’m keeping my one good eye on the 1.7250 area for entry, with a stop below the 1.7000 major psychological mark and a target near the swing high at 1.7600.
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