Australian Dollar Seen Higher Against 'Unconvincing' British Pound

The Australian dollar should profit against the pound sterling which is tipped to start struggling by a leading independent currency trader.

Are we about to see the end of the British Pound’s period of strength? Against the Australian dollar, in particular, this could well be the case.

A word of warning for those expecting pound sterling to move yet higher against the euro, and other major currencies for that matter.

Professional trader Sean Lee at ForexTell says, “there has been something unconvincing about the GBP in recent weeks and I feel that the big bull run, which has lasted now for 30 months, may be about to end.”

With that in mind, Lee says it’s difficult to be bullish EUR against any other currency in the current environment, “but this pair is heavily oversold on longer-term time-frames. Prefer to look elsewhere for my GBP short trade.”

The euro to pound sterling exchange rate is seen finding support at the 0.70 support zone with traders unwilling to chase the exchange rate lower than this point.

"Clearly plenty of downward pressure remains here but buyers continue to come in at 0.70 and I think it’s going to take something very significant at this stage to break it, possibly an indication of the size of the ECBs stimulus package," says Craig Erlam at Oanda.

Regarding the pound to dollar exchange rate; GBPUSD continues to claw back losses realised at the start of November.

The retracement was however dealt a blow on Friday when the conversion fell from a high above 1.53 to record a low at 1.5182.

“Short-term target at 1.5340/50 was achieved last night and I’d expect this level to now provide healthy resistance,” says Lee.

The trader believes that the Japanese yen could be one currency that could eat into the British pound over coming sessions.

“USD/JPY still looks reasonably buoyant whilst above 122.25 but if we start closing below 122.00 on a regular basis,  and if the cross can form a strong short-term top below 190, then GBP/JPY will start to look very interesting indeed.”

However, it is against the Australian dollar that Lee reckons the pound sterling could feel the most heat.

GBP/AUD is “still my preferred short trade. The AUD/USD does not have enough momentum to hold below 70 cents and GBP/AUD is looking toppy now towards 2.1500 on the dailies.”

AUD Shows Resillience

Walking into the new week the Aussie will hold the advantage having shows resilience over the previous week. Continued upside pressure has seen further repositioning away from shorts.

"The optics around the domestic data remain quite positive. As such, an upgrade in investment intentions – as we expect - combined with RBA communication that may point to the positives (notably the labour market and business surveys) could see the AUD squeeze a little higher," say ANZ Research ahead of the new week.

That said, ANZ continue to favour a more bearish medium term assessment, "the current momentum in Australian data is expected to fade in early 2016, while we see the commodity complex as a warning sign for the AUD. Iron ore prices are close to re-testing the mid-July lows, while copper presents an even more worrying picture."