GBPAUD had previously been consolidating inside a symmetrical triangle pattern on its 1-hour time frame before breaking lower. Price had dipped close to the 2.0400 major psychological support before showing signs of a retracement.
Using the Fib tool on the latest swing high and low shows that the 50-61.8% levels line up with the broken triangle support around 2.0600-2.0650, which might now hold as resistance. These are also close to the moving averages.
The 100 SMA is still below the longer-term 200 SMA, confirming that the downtrend is likely to carry on. Stochastic is on the move up, which suggests that a correction is taking place.
Event risks for this setup include the UK jobs release, which might show a 4.1K increase in claimants. The report is also expected to show a drop in the average earnings index from 2.4% to 2.1% but the unemployment rate is expected to hold steady at 5.2%.
As for the Aussie, the downbeat reports released from China yesterday are also weighing on its gains. In addition, the IMF’s decision to lower their global growth forecasts for this year and the next is taking its toll on risk sentiment.
However, the pound might be in for more declines since BOE Governor Carney clarified that they’re not looking to hike interest rates anytime soon. This led to a massive selloff for pound pairs yesterday, as traders pared expectations for a rate hike anytime this year.
By Kate Curtis from Trader’s Way