GBPAUD Trading Strategy: China CPI and the BOE

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GBPAUD Trading Strategy

We have been monitoring GBPAUD since the price broke below the neckline of the top Head-And-Shoulders (H&S) on the weekly chart. Following the breakout the price is currently re-testing the breached support (neckline) of the reversal pattern. Although by the book a weekly close is not required for such entries, locating the entry price is a difficult task as we will soon elaborate on.

GBPAUD Weekly Chart

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GBPAUD Weekly Chart 08/12/15

GBPAUD Weekly Chart 08/12/15

GBPAUD was able to find support at the 44 Moving Average (MA, in purple) that forced corrective gains in the FX cross. There are 3 possible entries in GBPAUD. The first entry is at current levels as the price re-tested the neckline (2.0835). The second possible entry is at  2.1145 if the price breaks above the neckline. The third possible entry is a re-test of the upper resistance (in black). The optimal entry is the third possible entry but there is evidence such a re-test will indeed take place. We are aware China CPI is due during the Asian session and the Bank of England (BOE) monetary policy on Thursday.

GBPAUD daily Chart

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GBPAUD Daily Chart 08/12/15

GBPAUD Daily Chart 08/12/15

The daily chart shows GBPAUD is re-testing the daily resistance at the time of this writing. If the resistance holds it may indicate a resumption of the downtrend is due as seen on the weekly chart. The protective stop is layered above the resistance (lower black line), targeting 2.0135. We are not setting the target at the 100% objective of the reversal (H&S) as corrective gains are likely to emerge throughout the expected downtrend. GBPAUD is capable of trading +200 pips per day. We are using a relatively tight stop for the cross, bearing in mind its volatile nature. We are hoping China CPI will trigger the initial weakness due to AUD sensitivity to economic data from China.

The reason why we prefer entering the trade prior to the daily close is due to the positive interest that we will enjoy at the rollover. As the daily chart is used the duration of the trade may range between 7 – 14 days but it will not surprise us if the target is acquired by the end of the week.

GBPAUD Trade Alert Details

GBPAUD short at market price (2.0810)
Take profit: 2.0135
Protective stop: 2.1019
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 14 days

11/12/15 UPDATE: Moderate gains in GBP and general AUD weakness triggered the protective stop of the short trade. We have been sitting on the fence for several days and decided to re-enter as 2.1145 is the second entry level for GBPAUD as we presented earlier.

GBPAUD Daily Chart

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GBPAUD Daily Chart 11/12/15

GBPAUD Daily Chart 11/12/15

GBPAUD short at market price (2.1145)
Take profit: 2.0145
Protective stop: 2.1327
Risk Ratio (RR): 1 : 5 (approx.)
Estimated duration: 21 days

14/12/15 UPDATE: Our second entry in GBPAUD was well-timed. GBPAUD is trading at 2.0895 at the time of this writing.

Please click on the chart to enlarge:

GBPAUD Daily Chart 14/12/15

GBPAUD Daily Chart 14/12/15

We are closing 30% of the short trade at market price and shift the protective stop to the entry.

14/12/15 UPDATE II: GBPAUD was heavily sold in today’s session, trading at 2.0905 at the time of this writing. The intensity of selling could mean corrective gains may be seen on Tuesday. The RBA minutes could trigger another leg lower in GBPAUD but we are concerned it may trigger a technical retracement.

One of the options is to lower the stop, which we refuse to do. In light of the heavy selling (near +300 pips from today’s high) we are closing 20% of the short trade at market price and maintain the stop at the entry. We are taking the partials ahead of the daily close as the spread will widen when the new daily session begins.

16/12/15 UPDATE: GBPAUD is trading at 2.0794 at the time of this writing.

Please click on the chart to enlarge:

GBPAUD Daily Chart 16/12/15

GBPAUD Daily Chart 16/12/15

We have decided to close the remaining parts at market price, ending the trade with a decent profit.

GBPAUD Trading Strategy: China CPI and the BOE
As GBPAUD short trades are closed this page can now be accessed by all traders. Open trades are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
GBPAUD Trading Strategy: China CPI and the BOE

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GBPAUD Trading Strategy: China CPI and the BOE

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GBPAUD Trading Strategy: China CPI and the BOE