Forex Analysis – Trade of the Day: GBP/AUD 2nd September 2014

Australian Building Approvals

At GMT 1:30 a.m., the Australian Bureau of Statistics released the month over month Building Approvals figure, which measures the changes in the number of approved new buildings in the country. Since an approval from the government indicates the future construction of a new building, it acts as a leading indicator of the overall health of the construction sector. Also, more construction work indicates more jobs to be created which may lead to more consumer spending. Hence, analysts consider the Building Approvals figure to be a leading indicator of the economy.

Last month, the Australian Building Approvals went down by 5%, and this month the forecast was set at a 1.7% growth. However, the actual Building Approvals grew by 2.5% in the last month.

UK Construction PMI

At GMT 8:30 a.m., the Markit released the UK Construction PMI figure that measures the level of a diffusion index created by surveying 170 purchasing managers from the UK’s construction industry. Analysts consider the UK Construction PMI to be a leading indicator of the country’s economic health as the construction sector usually creates ripple effects in the economy.

Last month, the UK Construction PMI came out at 62.4, which indicated a substantial expansion in the construction sector. This month, the forecast was set slightly lower, at 61.5, but the actual figure came out much better than expected, at 64.0.

Trade Recommendation for the GBP/AUD

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The GBP/AUD has been on a downtrend since July 16 and reached 1.7700 on August 28, which was the lowest this year. After the GBP/AUD price reached the lowest point in 2014, it formed a bullish pin bar and subsequently closed above the downward sloping trend line on September 1.

While the Australian Building Approvals growth was better than expected, the 2.5% growth was much lower than the previous month, when it grew by 5%. Moreover, the better than expected UK Construction PMI (64.0 against 61.5) was way better than the previous month’s 62.4. These two important leading economic indicators have set a bullish perception in the market.

Furthermore, the GBP/AUD has already broken the immediate downward sloping trend line, which confirms the fundamental data. If the pair can close above the resistance around the 1.7830 level, it would suggest a CALL in the GBP/AUD.

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About our Forex Analyst:  Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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