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Pound-Australian Dollar Forecast: Technicals Advocate for Short-Term Gains, but Market Rebound Could Cut Short GBP/AUD Upside

- GBP/AUD can bounce near-term
- However, sustainability of AUD weakness questionable
- Markets in bullish mood as more economies reopen

Aussie Dollar

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The Pound's recent recovery against the Australian Dollar could run further, according to technical studies of the GBP/AUD exchange rate with confirm potential for a rebound to take shape.

The Pound-to-Australian Dollar exchange rate has been in decline since a rally rolled over in early April, with the pair falling from a high of 2.04734 to current levels of 1.8600.

But the short-term picture has shown improvement according to a suite of studies conducted by Trading Central, a specialist technical analysis provider. Their view of the 30 minute chart - which can provide predictive powers for coming hours and days - suggests a rebound might extend towards 1.8771.

"1.8562 is our pivot point," says a note from Trading Central, "rebound towards 1.8771."

GBPAUD 30 minute chart

The Australian Dollar was put on the back foot late last week as global equity markets and commodity prices lost value, allowing the GBP/AUD exchange rate to recover some lost ground, rising from from a low of 1.8526 to close the week at 1.8620.

The Australian Dollar reversed some of its recent gains against the Pound, Euro and U.S. Dollar ahead of the weekend in response to a broad deterioration in market sentiment, as investors considered rising geopolitical tensions between the U.S. and China.

An apparent power-grab by Beijing in Hong Kong is proving to be the latest focal point for tensions, following China's move to take further direct control over the ex-British colony.

China on Thursday announced a law for the "improvement of security in Hong Kong", which will allow the mainland to tighten its grip on the semi-autonomous territory following months of anti-China protests.

A response by the U.S. is expected in light of the rising tensions between the world's largest and second-largest economies, which has in turn lead investors to pare back on exposure to stocks, commodities and any financial asset that tends to benefit when investors are optimistic - including the Aussie Dollar.

It appears that the short-term view advocating for a rebound in GBP/AUD is linked with this short-term dip in the Aussie Dollar owing to geopolitics. If global stock markets and commodity prices find their footing once more, the Australian Dollar could be liable to recover, putting a bullish stance on GBP/AUD in jeopardy.

Noting this possibility, Trading Central warn of an alternative scenario: "the downside breakout of 1.8562 would call for 1.8484 and 1.8438."

The Aussie Dollar was looking firmer on Tuesday in sympathy with an improvement in investor appetite, suggesting any positive bias on GBP/AUD might best be kept as a low conviction stance

"Global stocks have begun the week on a very solid footing and taken a leg higher to set new post-Covid highs as economies start to reopen and investors shrug off the simmering tensions over Hong Kong. The Nikkei rose over 2% to its best level since early March as Asian equities made broad gains with Japan ending its state of emergency," says Neil Wilson, Chief Market Analyst for Markets.com.

The Australian Dollar maintains a positive correlation with global investor sentiment, owing to Australian's significant trade ties to China. Typically, when global stock markets are rising it reflects positive investor expectations for global trade which is in turn reflected by an appreciation AUD.

"There are many positives for markets to latch on to: Japan ended its nationwide emergency, England will reopen non-essential shops by Jun 15th, whilst Dubai and Hong Kong are easing lockdown measures," adds Wilson.

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GBPAUD forecast