GBPAUD in focus
The pair was flagged by Morgan and Stanley by Adam earlier in the week, on Monday:
Morgan Stanley is also looking at the Australian dollar but they prefer the trade via GBP/AUD, which they suggest buying at market (1.8475) with at stop at 1.7900 and a target at 1.9500.
That’s a longer-term trade that will take some time to unfold but could payoff on a positive Brexit deal and continued China/trade worries.
I like the thinking, but hate the parameters for the trade.
When you consider the Brexit drama we have been having, who wants to endure 60+ point price swings on an ongoing basis? For me, this idea of a GBPAUD long is making sense now.
The optimism about A Breixt deal is gaining more and more coverage and traction. Yesterday saw the GBPUSD take full advantage of a weak dollar as a BUEB closed above the daily 100-day moving average. We have then had a flurry of ‘a deal is looking more likely’ comments, half-comments and rumours. See the following:
- Yesterday’s news wrap.
- Dominic Raab, the UK Brexit ministister, indicated negotiations had stepped up a notch.
- UK times reported that it expects Britain to stay in the EU and May is trying to re-galvanise her party behind a new compromise for the EU next week,
- Reuter’s out last night with report from ITV saying:
UK Chief negotiatior Olly Robbins has made meaningful progress in talks with EU’s Barnier.
So, the mood of the market is positive GBP. Now, that mood can change on a dime and I have posted on that previously here. Furthermore, I have also explained what I consider to be a very sensible way to trade the ebb and flow of the Brexit drama here.
To that end. Here is what I am looking to do today.
Firstly, nothing as we are waiting for the GDP data out for the GBP. Let that settle.
Secondly, I will flag up two places that look excellent for entering longs on this chart.
On the 1 hour chart you can look at the 50, 100 or 200 EMA’s to buy. However, I will wait fro price to react around those levels. I will not put in a buy limitorder, since the headline risk is strong.
On the 4 hour chart the 1.8200 level is the pivot point. Sitting just above that level is the confluence of the 61.8% Fib retracement and the 100 EMA.
There are, obviously, other entries available. Morgan and Stanley recommended an entry at market, The reasoning makes sense, but the risk doesn’t to me. Better to wait for obvious technical places to enter as traders will be eyeing those levels anyway. Oh, and needless to say, if it all goes belly up join the selling momentum and be grateful you are not having to endure another multi-point draw down.
Ok, folks, have a good day