Today is US Independence Day and as we expect, the markets will be thin. However, from yesterday’s robust ISM manufacturing data-57.8 from 54.9 reported a month ago, it fuels hope of further rate tightening as early as September. With this release we saw that upwards thrust in USDJPY pair above the psychological 113.00 mark even after yesterday’s stronger than expected Tankan survey which should have caused a correction. This is surely good news for the USD bulls who have been on the receiving end in the first half of the year and are now been buoyed by expectation of higher 10 year treasury bill yields. This kind of positive statistics is positive for the greenback and actually tends to cool things off even though it looked like the market is actually overextended and investors are being cautious while unloading the USD bears. However, there is no clear elaboration-other than rhetoric-on path taken by other central bankers-other than the Fed who have been crystal clear-when it comes to monetary policy direction. The ECB and RBA-rate announcement earlier today are a prime example-are constantly shifting goal post and jerking between hawkish and dovish tones. The unexpected tone today from the RBA saw a depreciation of the Aussie from their multi-month highs with chances of further degradation opening up.
Today we look at the GBPAUD and I’m bullish the Pound. Today’s highs was important and only cemented my bullish assertion of this currency pair. As you can see, the 1.67 level is a critical support and just like 1.58, price is always bouncing off from this level. Bullish momentum is already building up in the daily chart as %k and %d are almost parallel.
Trade as follows:
Stop Loss: 1.6850-Today’s lows
Take Profit: 1.76-this is weekly highs recorded in the May 2017
Have a good trading day.