The GBPCAD has broken below the rising trend which has remained intact since the middle of the day on Friday. Indeed, the pair has pared yesterday’s advance, and is now testing the 200-day SMA for support ahead of the BoE rate decision. As of late, market participants are weighing in a four percent chance that policy makers will hike rates twenty five basis points tomorrow. Traders will surely face increased volatility ahead of the rate announcement, however, when markets calm, the focus will shift to the Bank of England minutes which will be released on August 18th. Nonetheless, I will look to take advantage of the near term volatility, and enter a short position at 1.623, with a target of 1.615; stop at break-even.
The Australian dollar has rallied to its highest level since May 4th today, and looks poised to test pivot resistance at 0.9200. Indeed, the pair has made higher lows for four consecutive days, and in turn, the relative strength index is now nearing overbought levels. As our speculative sentiment index stands at -2.0, and signals for further upside potential, we do not rule out the test of 0.920. However, with U.S. Non-Farm payrolls on tap, a reading better than expected may fuel momentum in the U.S. dollar, and lead the AUD/USD to break below the rising trend, that is, if price action does not slip below the 0.9120 during the next 24 hours.
Retail positioning relates to our speculative sentiment index which illustrates where traders are at in the market. The larger the retail positioning circle is under the chart, the more likely it is that longs exceed shorts or vice versa. We will look to use this indicator in conjunction with other technical developments to dictate price action over the next 24 hours.
Every day at 16:00 GMT, we analyze potential 24 hour trade set ups. If the trade is indeed we will automatically place a stop at breakeven to control any unforeseen losses. This break-even level is illustrated by the horizontal line on each graph. The trade is no longer valid if it is not triggered by 16:00 GMT the next day. Good luck trading!
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Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, Intraday Trading, and Forex Trading Weekly Forecast
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