GBPAUD has been trending higher on its 4-hour chart, moving inside a rising channel visible on that time frame. Price just bounced off the channel support at 2.1150 and may be aiming for the top at 2.1800-2.1900.
Price could still encounter a bit of resistance at the mid-channel area of interest, which might spur another test of the channel support. Still, strong bullish momentum might be enough to sustain a climb all the way to the resistance.
Stochastic is on the move up, which means that buyers are very much in control of price action. However, the oscillator is already nearing the overbought zone, which could convince sellers to hop back in. RSI is also heading north, indicating that buyers are in play for now.
The SMAs appear to be on the verge of making an upward crossover, adding confirmation that the path of least resistance is to the upside.
Event risks for this trade include the release of jobs data from both the UK and Australia. A slower pace of job declines is expected for the UK, which might be enough to keep the pound afloat. However, Australia is expected to post a strong 14.8K rebound in hiring, which could also yield gains for the Aussie.
Earlier this week, China printed a strong headline trade balance but underlying components reflected a huge slump in demand. In particular, this could mean weaker imports from Australia, especially for its iron ore commodity shipments.
Chinese CPI data came in below expectations, adding further downside pressure on the Australian dollar. Fixed asset investment and industrial production reports are still up for release tomorrow and more signs of weakness could keep the Aussie’s gains limited.
By Kate Curtis from Trader’s Way