Trading opportunities on currency pair: last week the pound quickly reached the forecasted level. Whilst the Australian currency is under pressure and between the AC and the price there’s no bear divergence, there’s a probability that the 2.0026 level will be tested. A drop in the rate below the 1.9250 marker will cancel out the prospects for growth.
I’ve decided again to do a review on the GBP/AUD currency pair. A single week was required for buyers to achieve the forecasted 1.9561. In my 30th March idea I expected a GBP/AUD growth to the middle of the canal (fibo 61.8% from a fall from 2.0026 to 1.8826). Growth of the GBP/AUD stopped around the 1.9652.
On the back of Friday’s weak NFP data, the GBP/AUD rate dropped to 0.9337. However, by the day’s close the rate was able to recover to 1.9543. The Aussie will remain under pressure because of a fall in the price of iron ore and the expectations of a further relaxation of monetary policy by the Reserve Bank of Australia. Due to the general fall of the US dollar, the pound is doing a lot better than the Australian dollar.
Spot prices on iron ore on the Chinese markets fell to record minimums on fears of a slowdown in demand on the Chinese market. The state of spot prices on iron ore on 1st April of this year in the ports of northern China dropped to 49 dollars per ton.
Due to this, today I decided to consider the pound’s growth to 2.0026 against the Australian dollar. Although UK GDP growth in the final quarter of 2014 was reassessed and put higher, there are doubts of it achieving the indicated level. The approaching parliamentary elections in the UK are creating uncertainty. The elections will take place on 7th May. The pound could unexpectedly do a U-turn back downwards. It’s hard to tell when this will happen.
On Thursday, 2nd April, a televised debate didn’t show any clear leader. This means that the pound’s volatility will increase. If we manage to drop to 2.00, then by the end of the week it’ll be a spectacle.
Have a look at the rectangles which I’ve used to mark out impulse waves on the graph. We’re interested only in the behavior of the AC indicator. In three cases, the sharp rise of the GBP between the AC and the price is forming a bear divergence. i.e. the AC has flown off to the 0.200 zone and, in case its further fall to the base line, the GBP/AUD rate increased. On the AC and AO indicators I showed exactly what I expect. During the AC return to the base line, the price should manage to increase to 2.0026.
I would like to warn you that, as soon as you find patterns, the market changes and breaks the sequence of similar waves.
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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.
Director of Alpari's analytical department
## ojimadu position
Senior Alpari analyst
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