Australian Dollar Relief Against the Pound Forecast to be Shortlived

The Aus dollar has strengthened considerably agains the pound sterling as we move into the mid-March trading period.

“The GBPAUD pair is moving within an upside channel after placing the short-term trough of 1.7206 and has classically retraced of its upper line three times.” - ICN Financial.

Will the aussie is currently showing its mettle the longer-term uptrend in GBPAUD remains alive and weakness should prove temporary.

Indeed, as Kathy Lien at BK Asset Manatement tells us, weakness will offer attractive entry points for those looking to take advantage of further rises.

That said, short-term pressures are forecast to extend further with a test of 1.90 being a distinct possibility as shown by new research from a leading technical currency specialist.

At the time of publication the pound to Australian dollar exchange rate (GBPAUD) is quoted at 1.9394 - 1.4% lower than at the previous day’s close - which represents a massive decline by the standards of currency market movements.

Be aware that the above quotes are spot market levels and when paying internationally from your bank account you will find a rate that looks very different. However, an independent provider will guarantee to get you closer to the market, delivering up to 5% more FX in some instances. Find out more. 

Why is the GBPAUD Lower?

The answer lies with the Australian dollar side of the GBP-AUD equation.

The Australian dollar is sharply higher, alongside fellow commodity currencies the New Zealand and Canadian dollars.

The complex has gained in strength alongside commodity prices. These exporting nations tend to do well when their key primary exports command higher prices on the global markets.

The bellwether to watch is the oil price - brent crude is a whopping 1.77 pct higher while copper is 2.3 pct higher.

What Does the Outlook Hold?

Will the current bout of pound sterling weakness against the Aussie dollar last?

We don’t think so.

The following chart, courtesy of ICN Financial, shows us what context to place the current moves in sterling-Aussie.

The trend is lower short-term but higher long term (Click to view longer-term chart):

While the longer-term forecast is advocating for further gains, we note the shorter-term weakness currently underway could extend to 1.90.

“The GBPAUD pair is moving within an upside channel after placing the short-term trough of 1.7206 and has classically retraced of its upper line three times as seen on the provided daily graph,” say ICN Financial.

For those speculators reading this, the level of 1.90 and below could offer a good entry point from which to take advantage of any resumption of the longer-term rally.

Indeed, ICN Financial say: “Shorts are preferable with targets at 1.8980 and stop loss above yesterday’s recorded high at 1.9845.”