Premium Forex Watch Recap: August 5 – 6, 2024

This week, our currency strategists have decided to focus on the Reserve Bank of Australia’s monetary policy statement and the latest New Zealand jobs data for this week’s price outlook discussions.

Of the four discussions on price scenarios/outlooks this week, Two discussions arguably saw both substantive and technical arguments unleashed to become potential candidates for a trading and risk management overlap. Check out our review of that talk to see what happened!

Watchlists are discussions of price perspective and strategy supported by both fundamental and technical analysis, a crucial step towards creating a high quality discretionary business idea before working on a risk management and trading plan.

If you want to watch “Watch list” choose right when they are published throughout the week that you can subscribe to BabyPips Premium.

GBP/AUD Hourly Forex Chart from TradingView

On Monday, our currency strategists set their sights on the upcoming RBA announcement and its potential impact on the Aussie dollar. Our event guide indicated expectations of a “neutral hold” which could pave the way for a “buy the rumour, sell the news” event reaction scenario for the Aussie.

Based on this fact, we considered two main scenarios:

Potentially optimistic Australian scenario: If the RBA maintained its policy stance or even improved its economic forecasts, we thought GBP/AUD could suffer a decline. We have our eyes on potential bearish candlesticks around the short-term resistance of 1.9800, which could suggest a return to the bottom around 1.9570.

Potential Australian bear scenario: If the RBA surprised with a dovish tone or downgraded forecasts, we thought AUD/JPY could extend its downtrend, especially if overall risk sentiment turned sharply negative on global recession fears and/or speculation about resumption of JPY trade.

Well folks, on Tuesday it flipped and the RBA decided to deliver a “slow hold” that would make even the most ardent Aussie bears raise an eyebrow.

The central bank kept its official cash rates at 4.35 percent for the sixth consecutive meeting, stressing that high inflation remains a concern. RBA Governor Michele Bullock revealed that members did discussed a rate hike as an option and effectively ruled out a rate cut in the next six months.

This result triggered our fundamental GBP/AUD downtrend and supported our technical bias on the pair, but our target technical setup (bearish candlestick patterns around 1.9800) was triggered ahead of the target event.

So, in our view, this strategy was arguably “neutral” in support of a net positive result. The market moved as we expected the fundamental result and it moved favorably as it dropped about 200 pips from the target catalyst trigger.

But if we waited for the fundamental catalyst, a real-time adjustment of the technical strategy would have been required before setting the risk, raising the need for good trade planning and execution skills to reach a net positive result.

GBP/NZD Hourly Forex Chart from TradingView

On Wednesday, our strategists locked their radar on the New Zealand employment update for Q2 2024 and its potential impact on the New Zealand dollar.

First, let’s discuss the employment update in New Zealand. Based on our work in the Event Guide, we saw that expectations were for a weak net update in labor market conditions, with the unemployment rate expected to rise from 4.3% to 4.7% and employment change it is expected to decline by 0.2% quarterly. -quarter.

As usual, I have prepared two main scenarios to watch:

Potentially Optimistic Kiwi Scenario: If the jobs data surprised to the upside or were in line with estimates, we thought we might see a move below the GBP/NZD head and shoulders neckline around 2.1400, potentially taking the pair to 2 .1260 or even 2.1030.

Potential Bearish Kiwi Scenario: A weaker-than-expected jobs figure could provide fundamental relief for the NZD, which made NZD/CHF’s downtrend attractive, especially if overall risk sentiment remained net negative.

So what did I get? Well, Wednesday’s session in Asia was quick and the New Zealand employment update decided to surprise us as the jobs report came in sharply better than expected. The change in employment was 0.4% q/q (contrary to expectations of a 0.2% decline) and the unemployment rate was 4.6%, better than the consensus of 4.7%. Wage growth also beat estimates with a quarterly gain of 0.9% versus 0.8%.

Our GBP/NZD bearish bias has been triggered both fundamentally and technically this week, with the technical trigger coming first, likely drawing technical sellers into an extended move lower ahead of the jobs data from NZ. And once we got the positive NZ jobs update, the fundamentals probably pushed the Kiwi higher in the session.

So how did our discussion go? Well, in our view, we give it a “Neutral” rating of being potentially supportive to a net positive result. Both of our triggers came and the price action validated our biases, but the order in which they came would have made it difficult to execute without taking on additional event risk. Also, the hectic lateral action after the event would have made extracting some cores more difficult.

It would have taken early head-and-shoulders shorting before the event, or a short short on the release of jobs to increase the likelihood of a net positive. Or waiting for the jump for another shorting opportunity and taking quick profits could also have had a net positive result.