Trade GBP on Rising Channel Bounce – July 24, 2014

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Trade GBP on Rising Channel Bounce - July 24, 2014

Trade GBP on Rising Channel Bounce - July 24, 2014GBP/AUD has been in a steady uptrend, as indicated by the ascending trend channel on its 4-hour forex time frame. Price to trade GBP is moving close to the bottom of the channel, which lines up with the 1.7950 minor psychological support.

At the same time, stochastic is already indicating oversold conditions, which means that bears are getting exhausted, A move higher could indicate a pickup in buying pressure and possibly a return to the mid-channel area of interest at the 1.8250 minor psychological level. Stronger buying momentum could lead to another test of channel resistance at 1.8400.

Going long at 1.7950 with a stop below the channel or below the 1.7900 mark and a target of 1.8400 could yield a high return on risk for a swing trade. Moving the stop to entry once price reaches the mid-channel area of interest is a good way to protect profits.

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Trade GBP Signals

Take note though that the BOE appears to be less hawkish with its monetary policy bias, as the minutes of its latest meeting showed that policymakers are no longer feeling so strong about a rate hike before the end of the year. The minutes revealed that policymakers are worried about the lack of wage growth and the potential slowdown in the housing sector.

As for the Australian dollar, traders had a more bullish bias after the release of the upbeat CPI readings and the improvement in the HSBC flash manufacturing PMI for the month. This eased rate cut expectations from the RBA, even as the central bank mentioned that it will be sticking to a more cautious tone moving forward.

With that, GBP/AUD could make a test of the channel support and any possible changes in monetary policy biases could determine whether a bounce or break will take place.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com