GBPAUD Descending Channel (Oct 24, 2017)

GBPAUD has been trending lower, moving inside a descending channel on its 4-hour chart. Price is currently testing the resistance at 1.6900, still deciding whether to make a bounce or a break.

A bounce could take it back down to the bottom of the channel at 1.6600 while an upside breakout could mark the start of a reversal. Stochastic is already indicating overbought conditions and looks ready to turn lower, which could mean that bearish pressure would return. A bearish divergence can also be seen as stochastic made higher highs while price had lower highs.

The 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. However, the gap between the moving averages is narrowing and a downward crossover seems imminent, also suggesting a pickup in bearish momentum.

UK data turned out weaker than expected yesterday as the CBI industrial order expectations slipped from 7 to -2 instead of improving to 9. This signals weakening business conditions in the coming months as firms expect lower order volumes. Also, BOE member Cunliffe expressed doubts about a November interest rate hike, citing that the economy has slowed on the squeeze to real incomes and imported inflation from sterling weakness.

There are no reports due from Australia and the UK today, so market sentiment could be in charge of price action. Brexit updates would likely impact movements as well. On Wednesday, Australia has its quarterly CPI due and the headline figure could show a gain from 0.2% to 0.8%.

By Kate Curtis from Trader’s Way