What’s up forex fiends! With Aussie jobs and U.K. inflation data ahead, the recent consolidation in GBP/AUD is one to watch for a potential breakout play and much more!
GBP/AUD: Daily
Fundamentals & Catalysts
If you already checked out Pippo’s look at the week ahead, then you’ll know that both Sterling and the Aussie have top tier economic updates coming soon.
For the British pound, the latest U.K. inflation data is likely to influence the market’s level of conviction that we’ll see more rate hikes ahead from the Bank of England. From Australia, the upcoming Australian jobs data will likely shift expectations of when we may or may not see a rate hike from the Reserve Bank of Australia this year.
Expectations are that the U.K. inflation read will show an uptick in the core CPI data to 4.3% in January, while the Land Down Under may not budge from the recent 4.2% unemployment read. Of course, if either or both of these events massively surprise, then we’ve got a simple news play in the works, which is currently being setup on the chart above.
Price Action
On the daily time frame, the market has settled into a tight range withing the longer-term range, currently bouncing between 1.8950 – 1.9050 (much tighter than the 270 weekly average true range). So, the odds are pretty good that if we see either a bullish news outcome (strong U.K. inflation against weak Australia jobs data) or bearish one (strong Australia jobs against weak U.K. inflation data), then a consolidation breakout is the play to watch out for for short-term/swing players.
For the longer-term players, right now we’ve got a monetary policy divergence theme (BOE in tightening mode while RBA on the fence) likely supporting the overall trend higher since November 2021 when the market traded around 1.8100. And if this week turns data falls inline with that theme, then an upside break out of consolidation could bring back longer-term players to keep the uptrend going.
And of course, if the market drops despite that GBP/AUD bullish news scenario playing out, then the 1.8800 area (strong range support area) is one to watch as it could still draw in longer-term players looking for a better price to play the uptrend.
Overall, those are the higher probability setups to watch out for, but if we see the low probability news scenario of weak U.K. inflation and strong Aussie jobs data, then that would likely shift the outlook and spark both profit taking from GBP/AUD uptrend holders and fresh shorts from traders.
But what do y’all think? Are we about to see a strong directional move in GBP/AUD? Or will this week’s data lead to more choppiness?
