Macroeconomic analysis, positioning, technical analysis. Short G
Hello everyone, today I want to share a trading idea that recently triggered my short entry.
The GBP/AUD pair is hovering near period highs not seen since 2020.
I think in the short term we might witness some pullback. Let’s analyze the situation.
MACROECONOMIC ANALYSIS
- Data
The latest data reflects a marked improvement in the Australian labor market, with the unemployment rate beating expectations. A rise to 4.2% was forecasted, but the figure dropped to 3.9%. This comes after the RBA decided to keep the reference rate unchanged, adopting a dovish tone compared to recent statements. It remains to be seen if this data could shift the narrative once again.
- Economic growth
The positioning and momentum on the pound indicate confidence that the economy could grow by 2025 or that inflation will remain stickier than expected. This affects the BOE’s monetary policy decisions. Interest rates have risen more than in other economies and are now at their peaks. On the other hand, the BOE recently adopted a dovish tone, suggesting the possibility of four rate cuts in 2025.
In a recent article, Goldman Sachs highlighted that the UK’s growth might underperform expectations. UK GDP is expected to grow by 1.2% in 2025, slower than the Bank of England's 1.5% projection and slightly below Bloomberg's consensus estimate of 1.3%. The team predicts growth of 0.4% in the first quarter of 2025 compared to the last quarter of 2024, with a slowdown to around 0.25–0.30% quarterly for the remainder of the year. They also foresee inflationary pressures easing through 2025, paving the way for deeper rate cuts than currently priced in by the market.
https://www.goldmansachs.com/insights/articles/uk-economic-growth-may-lag-expectations-in-2025
- Interest rates
Interest rates in the UK have risen more than in other economies, reaching a peak of 4.6%, reflecting aggressive rate policies. Meanwhile, AUD/USD movements appear closely tied to Chinese rates, which are at historic lows, potentially priming for a rebound and, consequently, a recovery in the cross, due to potential stimulus measures for the Chinese economy.
POSITIONING
- COT (Commitment of Traders)
Let’s analyze the COT to check for extremes on either side.
https://www.tradingster.com/cot/futures/fin/096742.
Long positioning on the pound is at its highest since 2018, while for the Australian dollar, we are in negative territory after a decline. Momentum does not favor either currency, as traders are offloading or increasing short positions.
SEASONALITY
We are entering a period of strong negative seasonality for the pound, which typically tends to decline from the first week of December until the end of the month.
TECHNICAL ANALYSIS
From a chart perspective, the pair has just broken a dynamic trendline support on the 4H chart after a strong rally to period highs. The RSI clearly shows overbought conditions with bearish divergence.
Entry: Upon the break or retest of the trendline.
Stop Loss: Above the volume area signaling the break.
Take Profit: Near the volume area supporting the price.
Thanks for your attention!
The GBP/AUD pair is hovering near period highs not seen since 2020.
I think in the short term we might witness some pullback. Let’s analyze the situation.
MACROECONOMIC ANALYSIS
- Data
The latest data reflects a marked improvement in the Australian labor market, with the unemployment rate beating expectations. A rise to 4.2% was forecasted, but the figure dropped to 3.9%. This comes after the RBA decided to keep the reference rate unchanged, adopting a dovish tone compared to recent statements. It remains to be seen if this data could shift the narrative once again.
- Economic growth
The positioning and momentum on the pound indicate confidence that the economy could grow by 2025 or that inflation will remain stickier than expected. This affects the BOE’s monetary policy decisions. Interest rates have risen more than in other economies and are now at their peaks. On the other hand, the BOE recently adopted a dovish tone, suggesting the possibility of four rate cuts in 2025.
In a recent article, Goldman Sachs highlighted that the UK’s growth might underperform expectations. UK GDP is expected to grow by 1.2% in 2025, slower than the Bank of England's 1.5% projection and slightly below Bloomberg's consensus estimate of 1.3%. The team predicts growth of 0.4% in the first quarter of 2025 compared to the last quarter of 2024, with a slowdown to around 0.25–0.30% quarterly for the remainder of the year. They also foresee inflationary pressures easing through 2025, paving the way for deeper rate cuts than currently priced in by the market.
https://www.goldmansachs.com/insights/articles/uk-economic-growth-may-lag-expectations-in-2025
- Interest rates
Interest rates in the UK have risen more than in other economies, reaching a peak of 4.6%, reflecting aggressive rate policies. Meanwhile, AUD/USD movements appear closely tied to Chinese rates, which are at historic lows, potentially priming for a rebound and, consequently, a recovery in the cross, due to potential stimulus measures for the Chinese economy.
POSITIONING
- COT (Commitment of Traders)
Let’s analyze the COT to check for extremes on either side.
https://www.tradingster.com/cot/futures/fin/096742.
Long positioning on the pound is at its highest since 2018, while for the Australian dollar, we are in negative territory after a decline. Momentum does not favor either currency, as traders are offloading or increasing short positions.
SEASONALITY
We are entering a period of strong negative seasonality for the pound, which typically tends to decline from the first week of December until the end of the month.
TECHNICAL ANALYSIS
From a chart perspective, the pair has just broken a dynamic trendline support on the 4H chart after a strong rally to period highs. The RSI clearly shows overbought conditions with bearish divergence.
Entry: Upon the break or retest of the trendline.
Stop Loss: Above the volume area signaling the break.
Take Profit: Near the volume area supporting the price.
Thanks for your attention!
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