The GBP/AUD exchange rate is showing promise in the short term, recovering from oversold conditions that emerged in September. Traders are closely monitoring key support and resistance levels as well as upcoming economic events that could impact the currency pair.
Key Support and Resistance Levels
A significant support level at 1.8850 is expected to provide substantial support in the event of a British Pound (GBP) selloff. On the upside, resistance is relatively limited until around 1.95, which may become relevant if the Pound exhibits strong performance.
Australian Developments
In Australia, the Reserve Bank of Australia's Assistant Governor, Jones, is scheduled to deliver a speech. This speech could offer insights into the possibility of a future rate hike by the Reserve Bank of Australia (RBA). Signs of tightening monetary policy in response to China's improved economic data and strong domestic activity have the potential to boost Australian bond yields and support the Australian Dollar (AUD).
Additionally, the release of the minutes from the RBA's recent policy decision will provide further clues about the central bank's stance on interest rates.
Australian Employment Report
One of the week's highlights for the Australian Dollar is the employment report, which is anticipated to show a gain of 20,000 jobs. A positive employment report can strengthen expectations of an RBA rate hike and provide support to the AUD.
Chinese Economic Data
Australia's economic performance is closely tied to China, and Chinese economic data has a significant impact on the Australian Dollar. Chinese GDP figures for the third quarter are highly anticipated, with expectations of revealing a year-on-year growth rate of 4.4%. An uptick in Chinese economic activity could benefit the AUD.
UK Data Releases
The upcoming week is eventful for the UK, with a slew of data releases on the calendar. These releases include labor market statistics, inflation figures, and retail sales data.
Market Reaction to UK Data
The market's response to UK data will be closely monitored, as earnings and changes in employment levels can indicate the direction of UK inflation trends. Key data to watch includes Average Weekly Earnings and the unemployment rate.
Inflation Outlook
Inflation figures for September are a significant focus, with expectations of a year-on-year decline in headline inflation. However, the month-on-month reading is anticipated to have risen due to increasing fuel prices. Soft inflation data in September noticeably affected the Pound, and a similar undershoot in October could potentially place pressure on GBP/USD.
Consumer Confidence and Retail Sales
The end of the week will see the release of consumer confidence figures and retail sales data in the UK. While these data points are of interest, their impact is expected to be limited, given the significance of earlier wage and inflation data releases.
Technical Analysis
From a technical perspective, the GBP/AUD pair is currently displaying a bearish trend on higher timeframes. The recent pullback appears to have completed, reaching a confluence zone of previous support that may now act as resistance. The 61.8% Fibonacci retracement level adds to the significance of this area. The price is currently moving within an ascending wedge pattern, which suggests a potential downward breakout. Traders are closely monitoring this zone for a suitable risk-to-reward ratio for a short position.
In conclusion, the GBP/AUD exchange rate is poised for a positive short-term outlook, but it remains subject to developments in Australia, China, and the UK. Technical analysis also points to a possible trend reversal. As traders navigate these factors, the currency pair's direction in the coming days will likely be influenced by a combination of economic data and market sentiment.
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