GBP/AUD set for a big rally?
Fawad Razaqzada June 21, 2017 7:15 PM
So far this month, commodity currencies including the Australian and Canadian dollars had performed rather well. However it looks like that good run of form has come to an end for these currencies thanks to struggling metal and oil prices.
So far this month, commodity currencies including the Australian and Canadian dollars had performed rather well. However it looks like that good run of form has come to an end for these currencies thanks to struggling metal and oil prices. With RBNZ due to make its policy decision later on tonight, the New Zealand dollar could also come under pressure in the event the central bank delivers a dovish policy statement. Metal prices are undermined in part because of a stronger US dollar, thanks to a hawkish Federal Reserve. With the Bank of England also turning hawkish, the AUD could fall against both the USD and GBP.
The GBP/AUD rallied sharply earlier today in response to comments from the Bank of England’s chief economist. Andy Haldane said that “a partial withdrawal of the additional policy insurance the MPC put in place last year would be prudent relatively soon.” This is another clear signal that the BoE is turning hawkish.
So, with the AUD falling and GBP stabilising, the GBP/AUD could be about to stage a sharp rally in the coming days. In fact, this pair has already broken above the high of yesterday’s range (when it had formed a bearish-looking candle) and resistance at 1.6780. If the break can sustain itself then we may see price making higher highs and higher lows in the coming days. The bulls will like the fact that it has found support from its 200-day moving average. The false breakout beneath the prior low at 1.6690 is likewise bullish as it shows the sellers may be trapped. It is early days but price action is looking positive for the bulls. However if we see a new low below this week’s range then this would invalidate the bullish idea.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.