GBP/AUD Rate Forecast: Technicals Confirm more Upside Possible

It is too soon to suggets the GBP/AUD's run higher has already come to an end.

The British Pound / Dollar exchange rate has fallen back to 1.6525 having faded from the previous week's high at 1.6755.

The retracement is not unique to GBP/AUD as we have seen the broader Sterling complex come under pressure over the past 24 hours.

It is often the case that currency's that outperform one week find themselves at the back of the queue the next week as traders book any profits made on the ascent.

GBP/AUD’s surge higher since the election of Donald Trump has led to a technical configuration which suggests a possible reversal of the longer-term down-trend.

Not only has the exchange rate broken above the downtrend line from the May highs, but it has also formed three bullish Japanese candlestick patterns in a row -  a Bullish Engulfing, a Three Outside Up and a Three White Soldiers pattern have together in the last three sessions:

When Japanese candlestick patterns occur within a few bars of each other they tend to reinforce each other’s signals, increasing the probability that they will be followed by more upside.

This combined with the trend-line break suggests more upside.

Whilst resistance stands in the way in the form of the 50-day moving average and the monthly pivot at 1.6820, a break above the 1.6900 would probably lead to an extension higher to a target at 1.7000.

Latest Pound / Australian Dollar Exchange Rates

	Live: 2.0099▲ + 0.05% 12 Month Best: 2.1645
*Your Bank's Retail Rate	1.9415 - 1.9496
**Independent Specialist	1.9817 - 1.9898 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

The British Pound's recent outperformance came largely on the back of Trump's victory in the US Presidential elections which has driven UK bond yields higher, which has in turn pulled the UK currency higher.

Trump's promise of a massive investment stimulus once in office has suddenly seen expectations for rising global inflation shoot up amongst investors.

This has in turn seen bond yields in the US and UK rise, and typically rising bond yields attract currency inflows.

A by-product of this dynamic is a softer Australian dollar as it could lose its primacy as a go-to investment for yield-hungry investors. If the UK and US are offering rising yields investors may opt to repatriate currency invested in Australia over recent years.

With inflation and interest rate expectations rising globally the Aussies advantageous 1.50% return may not look quite to special in the future.

This has led to a sell-off in Aussie pairs, including the Pound.

Data for the Australian Dollar in the Coming Week

Employment Data is the highlight of the Aussie calendar in the week ahead, with a rise of 20k jobs expected in the month of October.

The data will be released at 00.30 (GMT) early on Thursday morning.

The Unemployment Rate is expected to come out at 5.6% in October.

Chinese Industrial Production, released at 2.00 on Monday, November 12, could also impact on the Aussie.

It is expected to show a slight rise of 6.2% yoy in October.

A result below the previous year’s 6.1% could spark Aussie selling, as China is Australia’s largest trading partner.

Data for the Pound

The main release for the Pound in the coming week is CPI (yoy) in October, which is forecast to rise 1.1% in October (from 1.0% previously), and is published at 9.30 on Tuesday, November 15.

Inflation already showed a strong 1.0% rise in September and if it continues to increase it will probably lead to an appreciation in Sterling as it will lessen the probabilities of the Bank of England (BOE) cutting interest rates in December.

Average Earnings on Wednesday may also be significant as an indicator of inflation pressures.

A rise of 2.4% in wages (excluding Bonuses) is forecast in the data from September.

The data is released along with the Unemployment Rate and Claimant count (expected to show a rise of 2k jobs) on Wednesday, November 15 at 9.30.

The week rounds off with Retail Sales on Thursday at 9.30.

The data for October is expected to show a 0.5% rise mom.