GBPAUD has been on a steady climb since May but it looks like a major correction from the rally is about to take place. Applying the Fibonacci retracement tool on the swing low and high shows that the long-term retracement levels line up with a rising trend line that has been holding since last year.
In particular, the 61.8% Fibonacci retracement level lines up with the 100 SMA, which is above the longer-term 200 SMA. This also coincides with the previous peak around the 1.9900 to 2.0000 psychological support.
Stochastic has already reached the oversold area, suggesting that selling pressure could fade soon. However, the oscillator hasn’t crossed up yet, indicating that there’s still a bit of bearish momentum left. Meanwhile, RSI is on the move down so pound sellers might still be in control of price action for the time being.
GBPAUD Fundamental Factors
Economic events in the UK have led to a sharp pound selloff last week, as Super Thursday revealed that not all central bank officials are ready to hike rates. Only one member voted to tighten in the latest policy meeting while Carney acknowledged that the move will be data-dependent. In addition, UK trade balance fell short of expectations on Friday.
Meanwhile, the Australian dollar has enjoyed extended gains thanks to upbeat retail sales, employment, and trade balance data. This was supported by a less dovish RBA statement, which showed that policymakers are no longer too worried about the currency’s appreciation.
However, the UK economy is still doing much better compared to the Australian economy and the BOE is more likely to hike rates earlier than the RBA. This suggests that the longer-term uptrend might stay intact after a huge correction owing to last week’s reports. After all, there are still risks stemming from the slowdown in China, which might have a larger effect on Australia’s exports.
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