The fundies on both the U.K. and Australia have me checking out GBP/AUD. What’s happening in both countries and is there a technical setup that makes sense?
Long Entry Setups on GBP/AUD
With expectations of further rate hikes from the Bank of England versus weak inflation and wage growth in Australia to keep rate hikes expectations from the Reserve Bank of Australia at bay, I’m fundamentally bullish on GBP/AUD in the short-to-medium term.
I also think the recent round of risk-off vibes will likely hurt the Aussie more than Sterling given the higher-yield the Aussie gives. And let’s not forget the recent round of commodities pressure from the proposed harsh steel and aluminum tariffs by the U.S.
Price action wise, the pair has been seeing higher “lows” going back to the Summer of 2017, but recently finding resistance around 1.7700 – 1.7900, an area that saw major resistance and reversals over the past two years.
It looks like this is a hindrance for the bulls once again, but if the fundies continue to play out, especially the dwindling interest rate differentials between the Aussie and Sterling, I think the probability grows that 1.7900 will finally break for what could be a solid bull run.
But if resistance holds and the pair falls back, I will be looking at those higher lows for a possible support area, where I will likely take a nibbler long position to play out my fundamental bias.
This could take a while to play out, so stay tuned for updates and 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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