Thanks to BOE Governor Carney’s hints that the UK central bank is looking to hike interest rates earlier than markets expect, GBP/AUD has made a strong convincing bounce off the range support visible on its 4-hour forex trading chart.
Stochastic is also moving higher, indicating that there is enough buying pressure to pus the pair towards the middle of the range and beyond. Jobs data from the UK has been much stronger than expected while Australia’s labor reports have been weak, adding further confirmation that the rally could continue.
Going long at the current levels with a stop below the range support and a target at the range resistance at 1.8300 could yield a 2:1 return on risk for a swing trade.
GBPAUD Trading Signals
Should rate hike speculations for the BOE keep up, GBP/AUD could eventually make it to the top of the range but it would be prudent to adjust the stop loss to entry once price starts testing the middle of the range. Bear in mind that another round of top-tier data is set for release from both the UK and Australia before the month comes to a close.
For now though, it’s reasonable to assume that the range support might continue to hold in the next few weeks, as the Australian economy is likely to see more weakness compared to the UK economy. After all, the Australian government has announced spending cuts in welfare, public health, higher education, and pensions in order to keep their deficit from widening too much. This could result to weaker spending and growth figures down the line.
As for the UK, rating agencies have confirmed their government’s current sovereign debt rating, as there appear to be no problems on the horizon.
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