- This week we had a hawkish RBA statement mainly because RBA brushed off the biggest economic concern which was the contraction of GDP in Q3, and saying that it was just a temporary number. Moreover, the outlook for inflation has also been better, although the risk of uncertainty especially toward U.S policy is still there and the worries over Chinese debt issue, RBA still sees a good positive outlook due to the high commodity price. After the meeting, we also so strong Chinese Trade Balance this week to continue support the AUD economy, alone with the positive Trade Balance form AUD last week. Meanwhile, GBP continued to be neutral currency with more risk event ahead to the downside. Now the BOE has removed the possibility of rate hike, the inflation is going to pick up and possibly hurt the consumption which means a rate cut is even more likely. Most important, the market will be vulnerable as the Brexit is going to be trigger officially. This will create a fresh new risk off sentiment for GBP in the near future. Today we also had a nice bearish Kangaroo tail with enough space to the left and at a nice mid zone.
- The catalyst was the positive RBA statement, AUD trade balance and the China Trade Balance. The catalyst for UK
- We’re at a nice area which is more like a range zone, the overall trend is still looking to the downside with room to go.
- The risk is any very positive sentiment coming out from UK which might benefit UK tremendously, meanwhile, if the global sentiment shifts again to the downside, we might get stopped out. We still favour this pair in the fundamental bias, so even if there is short-term setback due to the sentiment, we will still hold it as the fundamental picture is still in line with the trade.
- I’ll closely monitor it with any major news update partially the employment data fro AUD next week and any updates on Brexit.
- Yes this is a good fundamental trade with clear bias in AUD and GBP.
SL @ 1.6676
P @ 1.6036
****updated after the Press conference of Trump and Abe****
as expected, there weren’t too much updates and the general tone was quiet friendly.
According to the geopolitical location of Japan and U.S, the past history since world war 2, and the current necessity for U.S alliance in the Pacific ocean, i really doubt there will any disagreements that are large enough to tera up the relationship.
On the contrary, I think the weekend meeting will most likely be a gateway and show-off for U.S.
In terms of this trade, there aren’t any major fundamental reason to shift my perceptive in AUD versus GBP.
There are still more fundamental strengths and sentimental strength into AUD while the best positive sentiment will be the Brexit negotiation, which is not set to happen yet.
****updated Feb 13th 2am****
we don’t have any major news over the weekend, the current risk on sentiment and positive AUD sentiment still helps this trade, but few risk to worry especially the CPI data later on from China in Asian session, if it’s a miss then AUD will be pressured.
We also had rumours of Chinese stock market new regulations, and as we know that China is truing to curb speculations and debt issues recently, any curb will diminish the demand and effect the commodity price hence effect the bullish sentiment of AUD.
Also watch out for any further update on Brexit this week.
****updated Feb 14th 2am****
GBP continued to gain strength from the positive fundamental datas last Friday. The uncertainty of UK over Brexit still pressures GBP while the positive economic datas still supports GBP.
As mentioned, GBP is a neutral currency for now and can go either way depending on the external factors.
Today we will have the CPI data from UK that can move GBP upside or downside.
We’re still holding this trade because AUD is still the strongest currency for now and unless the fundamental picture changes, otherwise we think GBP/AUD is still heading to the downside.
****updated Feb 14th 7pm****
Today the inflation data from UK was a disappointment and this has sent GBP down across the board, later on the positive sentiment in USD has caused further risk on sentiment to press GBP/AUD and we finished the day with red solid candle.
Fundamentally the pair is looking good and should continue the path to the downside.
Major support at 1.60 and fundamental bias between AUD and GBP is still very large.
RBA continued to show confident in the economy and inflation, consumer confidences also went higher just in Asian session.
The only risk is another disappointed AUD data that can sink AUD down as so far what’s been holding AUD up is the excessive positive sentiment that has not yet been backed up by fundamentals.
AUD GDP will come in Feb 28th and before that there aren’t any major datas so we can still hold this trade, for now.
Tomorrow the unemployment rate of AUD might be a short-term boost or drag for AUD, but because the expectation has been negative, unless we have something that is really negative otherwise the effect of this data should be short lived.
****updated Feb 20th 3am****
The newest fundamental datas from UK has now given us more reasons to stay in this trade. Originally we got in due to the Aussie strength but wasn’t too sure about the neutral stance of GBP, however, the negative retail sales last week from UK has now fundamentally changed GBP into the negative currency.
We’re now more confident in this trade and will hold it until it reaches the profit target.
The short-term momentum might still give GBP some positive sentiment, but now we have more fundamental bias and we will keep holding this trade.
****updated Feb 20th 9pm****
We’re still in this range bound because no really actions in both currencies and the fundamental bias is really not as strong as other pairs we’re holding.
AUD seems to be at a resistance area fundamentally, although RBA tries to talk up the currency, but traders need to see a good fundamental data to support the logic of RBA - which we haven’t been able to see it so far with the disappointed labour market, inflation and the possible upset in next week’s GDP.
GBP also is up in the air with the Brexit Bill still under the parliamentary debate now.
We’re still holding it because the fundamental strength is still with AUD more than GBP, and also GBP had such a disappointed retial sales data last Friday.
But we’re less confident in this trade and as soon as we have a more negative shift in AUD then we will get out.
****updated Feb 22nd 1am****
we have moved our SL to BE in this trade. The reason is because we were not able to see any further fundamental weakness in GBP and that there is equal amount of seller and buyer for now. Meanwhile, AUD also fails to provide us with any fundamental data to back up it’s sentimental ride so far. The GDP data next week will be significant and although we still think AUD will be a good buy when versus other safe heaven currencies, maybe it’s not going to be too good when pairing up with GBP.
Move SL to BE.
****updated Feb 23rd 7pm****
we had a nice solid green candle today against us and GBP had been bought due to the weakness of EUR & USD.
There wasn’t really any catalyst to support GBP, on the contrary, the downside risks of GBP are still large with Brexit uncertainty and economic weakness.
We think the general direction of GBP/AUD is still to the downside.
****updated Feb 24th 5pm****
AUD had been sold off today due to risk off sentiment and the Metal price dropped previous days.
As expected, GBP kept going higher and finally stopped us out at BE.