Thinking of staying away from the U.S. dollar today?
How about a short-term opportunity ahead of the Bank of England’s (BOE) policy decision?
This week’s catalysts could offer a better chance to enter GBP/AUD’s longer-term trend!
As you can see, GBP/AUD has been trading inside an observable ascending channel since mid-March.Heck, the pair has been in an uptrend since early February when it found support from the 1.7300 handle!
One possible reason is that the U.K.’s record-breaking inflation rates will mean more work for the BOE compared to its peers.
On the other hand, China’s iffy post-lockdown trends will mean that the Reserve Bank of Australia (RBA) would have to be more thoughtful about its next rate hikes.
May is NOT shaping up to be a good month for GBP, though, with GBP/AUD showing lower highs and lower lows even before the RBA surprised us with a rate hike last week.
Will this mean a longer-term reversal for the pair?
Until GBP/AUD breaks its channel support, the pair will likely extend its longer-term uptrend.
Still, that doesn’t mean we can’t take advantage of the pair’s short-term downswing!
Besides, based on the BOE Statement Event Guide, traders tend to sell GBP after pricing in a rate hike for days. The currency also usually ends the week in the red on BOE decision weeks.So, today I’m hoping to take advantage of GBP/AUD May downswing and sell the pair at key inflection points.
I’m looking at the 1.8720 level that lines up with the 38.2% Fibonacci retracement and 1-hour chart’s 100 SMA as well as the 1.8740 – 1.8750 zone that’s closer to the trend line and 200 SMA resistance.
If today’s U.S. CPI report ends up being more bullish for GBP than AUD, then I may sell at the Fib levels and target May’s lows near 1.8600.
But keep in mind that we’ll also see new economic projections during the event.
Make sure you have your risk management options in mind if you’re trading the event this week!
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.