Last week saw a consolidation in USD longs with a returned buoyancy to the risk environment. With a lighter week heading into the US thanksgiving week it seems like the positive risk appetite of last week is likely to be extended as the market’s expectations for a “Dovish Hike” from the Fed continue to grow. The Australian Dollar was one of the beneficiaries of this improved risk-appetite as investor demand continues following the recent unexpected decline in Australian unemployment which echoed the recent optimism of the RBA regarding the domestic economy at their recent meeting.
Whilst the Australian Dollar is doing better in current conditions the UK currency is weaker as the latest fiscal revenue data revealed UK public finances to be in the worst shape since 2009 as public borrowing marks a six year high, putting increased pressure on the UK chancellor ahead of his Autumn statement this week. Market analysts conclude that far from achieving a surplus in the coming five years, the UK Government will instead register an even bigger deficit. The news of this deterioration in the domestic economy is likely to weigh heavily on UK rate expectations
- The break down through the recent corrective bullish channel in GBPAUD saw a sharp decline extending by over 500 pips with price moving below the recent 2.11 area support. Price has since recovered into a retest of the broken 1.11 area where it is now stalled.
- Sell GBPAUD at market in line with bearish Order Flow targeting a move back down into the October lows, stops above the recent swing high.
- Short from market at 2.1117 price has since tested key support level at 2.0890 where I have exited position, will monitor retracements for re-entry. If choosing to stay in, move stops to entry for risk free trade. – 24/11