Technical Sentiment: Neutral Key Takeaways
- Unemployment Rate in Australia jumped to 6.4%, weakening the domestic pair overnight;
- BoE holds Bank Rates steady at 0.50%;
- GBP/AUD confirms both support and range resistance.
The Australian Dollar took a beating last night when Unemployment Rate unexpectedly jumped to 6.4% vs. forecast 6.0%, bouncing for the second time off the support at 1.7977. GBP/AUD is currently boxed in between 1.7977 and 1.8185, offering two trade scenario.
Technical Analysis
Although the Sterling Pound maintains a bearish bias across the board, all eyes focused on the Australian Dollar last night as traders triggered a massive sell-off on weaker than expected AUD data. Price action has now slowed down and is expected to remain calm until later tonight, with most traders staying on the sidelines waiting for more hints from RBA Monetary Policy Statement.
GBP/AUD has officially formed a perfect range, having successfully rejected twice off the support at 1.7977 and from the resistance around 1.8185. All the large moving averages on the major time frames are already inside the range, offering absolutely no clue regarding the bias preference.
While we can expect more volatile whipsaws inside the range, the first trading scenario entails shorting GBP/AUD based on the resistance rejection. On the 4H time frame the pair has formed a bearish engulfing bar which will attempt to bring the pair back below the 200 Simple Moving Average. Shorting at 1.8140, below the 4H price action pattern, with a stop loss just above 1.8191, remains a valid trade scenario if the break happens within the current 4H bar. Stop loss should be moved at break-even rather quickly, with targets revolving around 1.8100, 1.8050 and lastly 1.7979.
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The second scenario, is a range break-out above 1.8191. In this case we expect the rally to continue in a similar volatile fashion, just like last night. 1.8367 will be the main target for traders, less than 1:1 projection based on the size of the range.
********* Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
