GBPAUD recently dropped below the descending triangle support at 1.6800, signaling that further losses are in the cards. Price bounced off the 1.6700 area and might be due for a correction to the broken support.
Applying the Fibonacci retracement tool on the latest swing high and low shows that the 38.2% level coincides with the broken support, which might hold as resistance moving forward. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside, which means that the selloff is likely to continue.
Stochastic is still pulling up from the oversold region to indicate a return in buying pressure or that the correction could carry on until the oscillator hits overbought levels and turns back down. Price could pull up to the higher Fibs as well, with the longer-term 200 SMA dynamic inflection point serving as the line in the sand for the downtrend.
The pound was weighed down by weaker than expected retail sales data, which indicated that consumer spending fell by 0.8% versus the projected 0.1% dip. Brexit updates also pushed the currency around as German Chancellor Merkel said that there wasn’t enough progress made for talks to proceed to the next round of negotiations.
As for the Australian dollar, data from China came in mostly in line with expectations, with retail sales and industrial production reflecting gains. Australia’s jobs figures also beat expectations, adding fuel to the Aussie’s ascent.
Only the public sector net borrowing report is due from the UK today and there are no reports due from Australia or China. This means that Brexit updates, particularly those coming from the EU summit in Brussels, could continue to drive pound price action while overall market sentiment could drive AUD direction.