Sterling and the Aussie crosses are in focus this week with potential volatility coming from Brexit developments and Australian economic data.
The U.K. has got a lot going on right now with Brexit developments popping up nearly every day, and this week’s no different with amendments to the Brexit deal being debated on this week!
Ample volatility should not be an issue for Sterling again this week and if you’re a bear on Sterling, check out this head and shoulders pattern on the one hour chart in GBP/AUD. The market is currently stalling at the neckline, and if it breaks, then additional sellers could pile in this potentially overbought market.
Now if you’re a Sterling bull, then this pullback setup on EUR/GBP may be for you. The British pound went on a heck of a run last week on the idea of parliament gaining control and blocking a “no-deal” Brexit outcome, but it looks like the rally ran out of steam on Friday.
This week we’re already seeing a bounce in EUR/GBP, nearly bringing it to the Fibonacci retracement area of the swing move from .8860 to .8620. Stochastics is already signaling potentially short-term overbought conditions, so watch out for reversal patterns between .8700 – .8770 to potentially return the market into the downtrend.
Australia is coming out with its quarterly CPI read this week, and if the number and reaction is anything like it’s neighbor’s situation last week (bullish Kiwi move to New Zealand CPI), then the Aussie could be in for some nice moves this week.
AUD/JPY is a great pair to watch, not only for the Australian CPI data, but also for trading the shifts in global risk sentiment. It’s also got a sturdy range that it can’t seem to break with the top trading around 78.80 and the bottom around 77.80. For now, playing the range is the higher probability play but if we get a big surprise from Australian CPI data, then it’s a good idea to be open to a breakout of the range.