Potential FX trade ideas update

Below I have reviewed current trade ideas for: EUR/GBP, GBP/AUD, GBP/JPY and Japan 225 cash.

USD
Source:Bloombger

EUR/GBP

I looked at selling EUR/GBP at 0.8030 on June 17, however the position hasn’t yet achieved my suggested entry point. I continue to hold the view that rallies in the pair to 0.8030 are potential selling opportunities. Recent price action suggests the downside in the short-term is limited and we’ve seen the five-day moving average flatten out. The MACD on the daily chart is firmly below zero and this backs up my view that rallies could be good selling opportunities.

GBP/AUD

I looked at GBP/AUD longs on June 18 at 1.8140. The trade got off to a bad start, moving down to 1.8035, but has since recovered. There is a limited amount of Australian data out this week and while the market should support the AUD, given its compelling real yield (or bond yield adjusted for inflation), a closer focus on the UK is warranted. BoE governor Mark Carney speaks in two separate occasions this week, so his views on interest rates will be key. With the trade effectively flat, I continue to focus on upside potential here.

GBP/JPY

I looked at long GBP/JPY ideas on Friday at 173.56 for a potential move to 176.50. Technically I still like this trade and continue to focus on upside potential. While volatility is low I still feel there is downside potential in the JPY as traders focus on yield. UK gilts have had a fairly aggressive move of late (positive for sterling) and one could make an argument that quite a bit of good news is priced into sterling at current levels. However, when you see two-year UK gilts (bonds) commanding an 81 basis-point premium over Japanese two-year government bonds, one has to think this is extremely supportive for sterling.

Japan 225 cash

I am looking for a slight pullback in the Japanese market in my ‘one to watch’ as a potential entry point for longs

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