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GBPAUD Hits Target & Cable Short Triggered

Market Analysis

GBPAUD, Daily             

On Tuesday (July 12) during our webinar, we discussed the GBPAUD, we were looking for a close on the day above the 1.7250 area for a LONG trade. The pair appeared to have found a floor at 1.7110 following seven of the previous eight daily sessions had closed lower.  This pair was oversold with a solid floor.  We entered at the close on Tuesday at 1.7360 with a target set at 50% of the eight day down trend at 1.7610.  This target was hit over night for a gain on the trade of 250 pips net.

At the beginning of the month (July 1st) we posted that we expected the Cable pair to head for “1.3000 and then down to 1.2500 and possibly as low as 1.2000 over the next few months but that the 1.3450 – 13650 level would probably have to be reached first.  Cable was trading around 1.3300. A few days later the pair sank below the 1.3000 handle as economic and political uncertainty persisted in the UK. A rally in the pair has been sparked by the quicker than expected appointment of a new UK prime minister (Theresa May) and her swift actions in creating her own new government.

The rally yesterday in GBPUSD pair generated a move into our sell area between 1.3450– 1.3650 and we are now SHORT from 1.3450. Today cable has rebounded above 1.3400 after dipping to 1.3349 during the early London session. The pound has bounced in a like manner against the euro and yen, among other currencies. A degree of uncertainty about the expected BoE loosening next month seems to be to be cause of the pound’s bid, with the central bank wrong-footing markets yesterday and causing some revisions for the repo rate to be as low as zero by August. During the Asian session, which is an illiquid time for the sterling market, Cable clocked a 16-day high at 1.3480. The pound remains 10.8% below the high seen just before the Brexit vote. This net loss reflects both uncertainty  which itself disrupting economic activity, and the risk that Brexit will UK end up with, as the BoE put it yesterday in the minutes to its MPC meeting, a “persistent shift” in the UK’s terms of trade.

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Stuart Cowell

Market Analyst


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