We’ve got key Brexit events up ahead that could be huge movers for Sterling this week. I’m zooming out the higher time frames for both long & short ideas on GBP, plus we’ll look at a setup for those who want to avoid big news events.
In case you weren’t aware, we’ve got a series of important Brexit votes this week: the Withdrawal Bill vote, the “No Deal” vote, and the Brexit delay vote. If you need to catch up before the potential fireworks happens, check out Pip Diddy’s GBP weekly outlook here.
After reading that piece and deciding you’re bullish on Sterling on a longer-term basis, you may want to check out GBP/AUD. The pair has been steadily grinding higher in 2019, now testing a major area of interest that drew in sellers back in October around 1.8700. We’ve already seen one reversal lower from 1.8700 this past month, but buyers held 1.8400 today to create another potential rising high in this recent trend higher.
Look for buyer support around 1.8400 – 1.8500 to plan out a pullback long trade, or if the right bullish Sterling catalyst comes along, then a break of 1.8700 is what you should watch out for to structure long setup.
Besides the big week of potential Brexit catalysts, the Bank of Japan has its latest monetary policy decision this week. It’s not usually a market moving event, but when it does surprise the markets, it can be one of the big ones. This definitely makes GBP/JPY a watchlist candidate this week, and if you’re bearish on this week’s Brexit events, or wanna take a risk-off type position, looking for a short position on Guppy is a viable option.
On purely price action, the pair is running into and once again finding major resistance around the 148.00 – 150.00 area, so traders are likely to watch it for another selling opportunity on a retest and bearish Brexit vote results. And since the pair the previous major support area is around the 136.00 handle, the potential risk-to-reward for a longer-term short is pretty favorable when using the weekly ATR of around 320 pips as a potential stop.
Last but not least, for those who are trying to avoid news catalysts for the next couple of weeks, NZD/CAD fits the bill with a lack of major news events scheduled until near the end of the month.
For now, technicals could be a big driver for the pair, and on the daily chart we can see a “cup and handle” pattern forming with NZD/CAD. The pair made round trip move from 0.9100 down to 0.8400 and back to form the cup, and since then it has been consolidating between 0.8900 – 0.9100 to form the handle.
Today we’re seeing an upside break of the handle and if it can break the falling trendline and previous swing high around 0.9250, buyers could be drawn in and take the pair to retest swing highs around 0.9500 and 0.9750. And vice versa, if the market breaks below the “handle” and support around 0.8900, then it’s likely a return to the trend lower that could see a retest of 0.8400 and beyond with the right catalyst down the road.