Traders Should Look to Go Short on the EURGBP
EURGBP Potential Breakout | Descending Triangle Support
With the BOE and ECB interest rate statements lined up for today, the EURGBP pair should be an interesting one to trade. On its longer-term time frames, it can be seen that the pair is forming a descending triangle pattern and is currently testing support.
A neutral to hawkish BOE bias combined with a very dovish ECB statement could lead to a downside break of .7800 support and further losses until the next visible support zone at the .7000 major psychological handle. On the other hand, a relief rally for the pair on lack of dovish ECB rhetoric or a very dovish BOE bias could lead to an upside move until the .8200 major psychological resistance.
The shorter-term 100 SMA is still moving below the longer-term 200 SMA on the daily time frame, which suggests that a downtrend is brewing. However, stochastic on the same time frame is starting to move up from the oversold area, indicating a pickup in buying momentum.
Consolidation is also possible as traders might rather wait for the BOE minutes to be released before taking action on the pair. After all, the central bank has been switching its bias from time to time and it might be more prudent to see how policymakers are assessing the economy before taking any directional biases for pound pairs.
Further Downside for AUDUSD | Major Support Breakdown
Weak jobs data from Australia has sparked another strong selloff for AUDUSD, which has been testing a key support zone in the past few days. Strong data from the US has exacerbated the selloff, leading to more downside for the forex pair.
On the daily chart, it can be seen that price already broke below the .8600 major psychological support and may be headed to the next one at .8000. Falling commodity prices have been weighing on this pair, along with the downturn in risk sentiment.
However, should the breakdown prove to be a fakeout, AUDUSD might still bounce up to the near-term resistance at the .8700 major psychological mark. Event risks for this setup this week include the US NFP release, which could show a slightly weaker pace of hiring gains.
Improved sentiment towards the US economy could continue to keep AUDUSD gains in check, as the FOMC has recently shifted to a more hawkish monetary policy stance. The RBA, on the other hand, is maintaining its pledge to keep rates low for much longer and insisting that the Australian dollar is still overvalued.
AUDNZD Ascending Triangle | Bullish Divergence Signal
AUDNZD has been forming an ascending triangle chart pattern on its 4-hour time frame, as price has made higher lows and found resistance around the 1.1300 handle. At the moment, the pair is testing the bottom of the triangle or the rising trend line support.
At the same time, a bullish divergence can be seen, as price made higher lows and stochastic made lower lows. The oscillator has yet to move out of the oversold region before confirming the potential bounce but it looks like the support is already holding so far.
In this case, AUDNZD could make its way back to the top of the triangle at the 1.1300 handle. However, a downside break could indicate that further losses are possible. Take note that the chart pattern is around 400 pips in height, which means that the resulting breakdown could be of the same size.
Bear in mind that Australia just printed generally weak jobs figures, as the jobless rate ticked higher and there were significant downward revisions made on previous data. This could mean that the path of least resistance for this pair is to the downside, especially since New Zealand just released a stronger than expected quarterly employment report.