GBP/AUD Rate: Week-Ahead Forecast

GBP/AUD has risen over the last week, moving up to a level of 1.6500.

The pair now appears a little overextended to the upside.

We note the shooting-star candlesticks at the highs (circled) which can be an indicator the trend is changing, as well as the MACD which is rising and also looks very toppy (also circled).

Shooting stars are days which have a long upside range but close back down near the open. They are an early bearish indicator, but gain from confirmation by a further day or more of downside.  

From a technical perspective, the topping signals are not definitive enough to suggest a reversal yet, so the trend could extend higher.

Therefore, a break above the highs of the shooting star and 1.6610 would signal a continuation higher, to a target at 1.6700 just below the upper borderline of the triangle pattern.

Data for the Australian Dollar

The Aussie has lagged other G10 currencies recently as data has caused more confusion than clarity, with data from the services sector of the economy proving constructive but retail sector and manufacturing data showing signs of potential slowdown.

In the week ahead, the main focus will be on employment data which is currently of concern to economists due to the extremely high share of reluctant part-time workers in the economy who would like to but cannot extend their hours.

The Labour data is out on Thursday, April 13 at 02:30 GMT and is forecast to show a 20.3k rise in employees, whilst the Unemployment Rate is forecast to remain at 5.9%.

"The main focus in Australia in the week ahead is the employment data for March," says a note from Commonwealth Bank Australia who are forecasting a solid 25k increase in jobs in March following the 6.4k fall last month.

"We think the unemployment rate will stay at 5.9%. The leading indicators of job growth are suggesting positive outcomes in the months ahead. Trends in the labour market are particularly important to watch at the moment. While the RBA seems comfortable for inflation to be below target they would be sensitive to a deterioration in labour market conditions," say CBA.

Also keep an eye on China.

“In the coming week, Australian labour data and China’s trade balance will be the numbers to watch. The RBA has recently expressed concern about the labour market, which makes this month’s report particularly important. China’s trade balance will most likely rebound after the unexpected deterioration last month,” says Kathy Lien of BK Asset Management, in relation to the week ahead.

Big Data releases Ahead for the Pound

While New Zealand has little on the calendar we have some big releases in the UK, and this is where any potential moves in GBP/NZD are likely to be derived.

“In the run up to Easter, we suspect we will see a relatively quiet period for political news, with few top tier political events,” says Victoria Clarke at Investec in London.

“With the Easter holidays approaching and with UK Parliament in recess, there is likely to be little by the way of major developments in Brexit talks over the coming week.”
Luckily, for those looking for the Pound to move we have some big data events ahead.

“With fewer political happenings, data will likely move to the fore next week,” says Clarke. “In the UK, data is likely to take centre stage too.”

CPI inflation figures for March are due out Tuesday morning; markets expect to see inflation at 2.3%, unchanged on the previous month’s reading.

Should inflation beat expectations we would anticipate the Pound to move higher.

But we think the core CPI reading will be more important as this presents a better reflection of the underlying strength of UK economic activity and is therefore the figure that would most likely interest decision-makers at the Bank of England.

Markets are forecasting core CPI to read at 1.9%, a little softer than the 2.0% reading seen in the previous month.

Again, should this number beat expectations then look for the Pound to jump.

Labour market data is the next big data event foreign exchange traders will be keeping an eye on and is due for release at 09:30 on Wednesday, April 12.
The claimant count is expected to fall by 3K while the unemployment rate is forecast to remain static at 4.7%.

But watch average earnings data as this is what gives a really good gauge as to the health of the economy and the potential spending power of the UK consumer.

Average earnings with bonuses included is forecast to publish at 2.2%, unchanged on the previous month’s reading.

If the figure comes in higher we would imagine the Pound will move accordingly and we would watch for the GBP/AUD exchange rate to edge up towards the 1.67 target we mentioned in our technical studies.

Disappointment will likely be punished and we would anticipate GBP/AUD falling back towards recent ranges and perhaps the 50-day moving average denotated by the red line in the technical chart.