GBP/AUD Rate: Next Stop 1.6500
The Pound to Australian Dollar exchange rate (GBP/AUD) has continued falling in a trend established after the exchange rate peaked at the 2017 highs at 1.7660 back in May.
Our technical studies suggest the pair is now likely to decline further as the short-term downtrend extends.
Technical studies are based on price action and the structure of the market and cannot account for any moves stemming from major, unforseen events. Nevertheless, they are excellent in cutting out the day-to-day noise in the exchange rate market and setting objective targets.
The pair has now met with the target from our week ahead forecasts at 1.6600.
It appears to have broken below the major girdle of support located in the 1.67s, which includes the 50-week MA, the 200-day MA and the 50% Fibonacci level of the previous up-move – all levels where prices would have been expected to reverse or stall.
The break below is likely to quicken the downtrend, which is now likely to reach 1.6500 assuming confirmation from a break below the 1.6600 lows.
The falling MACD continues to corroborate the downtrend.
Some analysts see the down-move as probably temporarily exhausted at the 1.6600 lows.
“Market should not go lower than 1.6635 - 1.6582. After this move down it should go up to 1.6725 - 1.6762 area,” Forex trading- signal website Tradertip said.
Even in their longer-term analysis, Tradertip see the 1.67 level as an important support, since a break below, “1.7062 would indicate a move down to the 1.6775 zone," thus downside may be curtailed, which stands in contrast to our own analysis for the pair to run lower to 1.65, however, they give no rationale.
From a fundamental perspective recent data has shown that the Australian economy has improved and the Reserve Bank of Australia (RBA) stopped cutting interest rates at its last meeting, which is a positive sign for the currency.
Much, however, depends on the trajectory of iron ore prices, Australia’s biggest export, and analysts are spilt over whether they think the sell-off in the ore will continue.
