Pound Defends Key Level Against Australian Dollar - But GBP/AUD is Not Safe Yet
- Written by: Will Peters
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The Aus dollar (AUD) has surged higher against the British pound over the course of the past 48 hours, is there more to come?
At the time of writing we note that a test by GBP/AUD of the psychologically important zone of 1.8000 has been successfully defended and offered GBP support.
The Australian currency has meanwhile been subjected to a tumultous session of trading as a member of the Reserve Bank of Australia (RBA) mentions the possibility of currency market intervention by the Aussie central bank.
A look at the Aus rate today shows:
- The British pound to Australian dollar exchange rate (GBP/AUD) is 0.18 pct higher on a day-by-day comparison at 1.8048.
- The euro to Australian dollar exchange rate (EUR/AUD) is 0.25 pct higher at 1.4341. (See graphs and history).
- The Australian to US dollar exchange rate (AUD/USD) is 0.31 pct lower at 0.8693.
* Keep in mind the above conversions are indicative of interbank spot quotes. Your bank will levy a spread on the rate at discretion. To ensure you get as close to this market rate as possible get in touch with an independent specialist.
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Will the Pound Sterling be Saved by Technical Support?
The pound has fallen quickly this week - the high of the previous week was seen at 1.8680, this week's high was at 1.8440 and we are now down to just above 1.8000.
Good news for those looking to move Australian dollar's into sterling.
As the below shows, this level has provided support for the GBP/AUD on many occassion and could well be the source of much-needed relief to those looking to buy Australian currency with sterling.
That said, we woudl view a break lower through this level as opening the door to a quick fall down to September lows at around 1.7200.
Australian Dollar Hit by RBA-Inspired Volatility
Looking at recent action in the AUD we see the complex has seen hightened volatility in the past 24 hours after RBA Assistant Governor Christopher Kent mentioned the prospect of intervention in a Q&A session after a speech in Sydney.
"The AUD/USD immediately tumbled more than 60 points as headlines crossed the news wires but the pair quickly stabilized and retraced all of its losses after traders had a chance to fully digest Mr. Kent's statement," says Boris Schlossberg at BK Asset Management.
Kent spent a considerable amount of time explaining why growth remained below trend, attributing the weakness to slowdown in mining, an overvalued currency exchange rate and ongoing fiscal consolidation.
When asked about the prospect of intervention Kent stated that, "We haven't ruled it out. It's still there as an option if needed." This was a rather mild repetition of Governor Steven's position on the issue which essentially reaffirmed the long standing RBA policy on freedom to intervene should the central bank deem it necessary to do so.
"One of the key provisions for such a policy move is that the currency must be at either an extreme over or under valuation. Given the fact that the RBA did not intervene at when AUD/USD was 1.0800 it is unlikely that the central bank would step in at .8800. Thus upon further reflection Mr. Kent's comments were seen as simply another attempt at jawboning by RBA and Aussie quickly regained its footing," notes Schlossberg.
