GBPAUD has been trending higher on the 1-hour time frame, moving above an ascending trend line connecting the latest lows of price action. Profit-taking seems to have taken place around the 2.0350 minor psychological resistance, opening the possibility of a pullback to the rising support area.
The trend line coincides with the 2.0000 major psychological mark and the 100 SMA,which has held as a dynamic support area. In addition, the 100 SMA is above the longer-term 200 SMA so the uptrend is likely to carry on.
Stochastic is already indicating oversold conditions and is starting to turn higher, indicating that sellers are exhausted and allowing buyers to take over. RSI is still on the move down, though, so there might be enough selling pressure left to spur a test of the trend line.
Data from the UK has been mixed this week, as CPI readings fell short of expectations while jobs and retail sales surprised to the upside. Headline CPI fell from 0.5% to 0.3% while core CPI slipped from 1.5% to 1.2%. The April claimant count showed a gain of 2.4K jobs instead of the estimated 4K decline while the average earnings index improved from 1.8% to 2.0%. Retail sales grew 1.3% versus the 0.6% consensus.
As for the Australian dollar, data from China has been weaker than expected over the weekend, with retail sales, fixed asset investment, and industrial production all indicating weakness. This could lead to lower demand for Australia’s raw material commodity products, thereby weighing on exports and production.
Also, the RBA recently cut interest rates by 0.25% and signaled room for further easing. The BOE, on the other hand, has maintained a relatively upbeat stance but cautioned that a potential Brexit could pose more risks to the UK economy.
By Kate Curtis from Trader’s Way