Triggering of Article 50 and Brexit can either happen this week or next. Eurozone and particularly Germany has promised not to make this divorce easy. It will come hard on Britain and when a promise of retaliation fills the air, uncertainty creeps in and that will break the GBP. Early in the year, most analysts predicted the GBP will be in parity with the Euro. With the current Brexit talks, it may or may not happen. Remember last week’s MPC meeting there was a vote for a rate hike which brings the possibility of an initial depreciation before support is found. Either way, we wait for what Theresa May does in the coming days. There is nothing much fundamentally after last week’s events. We expect the RBNZ to announce their OCR today and any talk of further rate cuts will be bad news for the kiwi. We also expect talks from Kashkari, Dudley, Kaplan and Evans. All of them are eligible to vote during Fed’s FOMC meeting. Remember, Kashkari was the only dove last week and his vote shifted the dot plot. Volatility will depend on their views of the economy and if they are pro tightening or easing. If they are all reading from the same page and inclining towards a particular view, then the greenback can continue to slide or solidify after last week slump.
Today my strategy is to buy the AUD. In the 30 min chart there is a good buy opportunity. There is a buy signal and is in tandem with yesterday bullish move. With RBNZ rate decision coming later on, I would look to ride on the general bullish sentiment on commodity currencies. There is a good reversal pattern at the 23.6 Fibonacci level in the 30 min chart. Targets will be yesterday’s highs and I will trade this as follows:
Stop Loss: 0.7690
Take Profit: 0.7755 for a 1:2 Risk reward ratio