- GBP/AUD forecast to extend lower
- Beware near-term relief rally in GBP
- Global environment is pro-AUD
- RBA policy meeting sees settings left untouched
- RBA concern over AUD appreciation is something to watch going forward
Image © Adobe Images
- GBP/AUD spot rate at time of writing: 1.8389
- Bank transfer rates (indicative guide): 1.7745-1.7874
- FX specialist rates (indicative guide): 1.8223-1.8297
- For more on specialist rates, please see here
The British Pound looks destined to extend a multi-week decline in value against the Australian Dollar, with an entrenched downtrend in the GBP/AUD exchange rate potentially targeting a move to 1.76 in coming weeks according to recent analysis.
To emphasise the nature of the downtrend that is in place we can see the Pound-to-Australian Dollar exchange rate has now fallen for four weeks in succession, and has fallen in seven of the last nine weeks as a global economic recovery pulls the Aussie Dollar higher.
The GBP/AUD pair is quoted at 1.8411 at the time of writing, with analysis from Trading Central showing that the multi-day timeframe is likely to yield further declines as long as the exchange rate remains stuck below resistance located at 1.9073.
Only a break above 1.9073 would result in a turn of trend that favours Sterling, according to Trading Central, a provider of technical analytics and intelligence.
With the downside expected to prevail, forecast targets of 1.7927 and 1.7609 are expected to be reached over coming days and weeks.
However, it must be noted that the RSI indicator on the daily chart is trading below 30 which suggests the pair is now considered to be oversold. Therefore, a pullback is possible in the short-term.
Any pullbacks at this juncture are to be considered temporary in nature owing to the prevalent downtrend gripping the exchange rate.
"The MACD is below its signal line and negative. The configuration is negative. Moreover, the pair is trading under both its 20 and 50 MAs (respectively at 1.8951 and 1.9483)," notes Trading Central.
The advance by the Australian Dollar comes amidst an ongoing recovery in global stock markets and commodity prices, with investors viewing as positive the gradual lifting of lockdown restrictions in the world's major economies.
A lull in U.S.-China jawboning is also proving supportive to global investor sentiment, to which the Australian Dollar remains positively aligned.
"While U.S. President Trump levelled plenty of criticism on China and went as far as to strip Hong Kong of its ‘Special Status’- he didn’t formally escalate tensions with China. There is relief across markets – particularly those sensitive to China like Hong Kong shares and the Australian Dollar," says Jasper Lawler, Head of Research at LCG.
The Aussie Dollar was meanwhile left unhindered by the Reserve Bank of Australia (RBA) which opted to maintain a steady steer in their latest policy update.
The June policy meeting saw the RBA opt to to maintain its current policy settings, which includes leaving the basic interest rate at 0.25% and the yield on 3-year Australian Government bonds of 25 basis points.
The accompanying statement concluding that "the Board is committed to do what it can to support jobs, incomes and businesses and to make sure that Australia is well placed for the recovery. Its actions are keeping funding costs low and supporting the supply of credit to households and businesses".
The RBA added "this accommodative approach will be maintained as long as it is required. The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band".
As long as the RBA is prepared to sit on the sidelines and let the economy recover we would expect it to be little threat to the Aussie Dollar's ongoing recovery.
However, the RBA has in the past commented on the value of the AUD following periods of substantial appreciation, and we wonder whether the currency's ongoing period of appreciation might soon come up on its radar.
The Aussie Dollar is now up 3.0% against the Pound in 2020 but is down 3.0% against the U.S. Dollar. However, the strengthening of the currency has been backloaded into recent weeks, meaning it is up 5.75% against the U.S. Dollar over the course of the past month. Against the Pound the Aussie is up 5.0%.
There is a risk that the Aussie continues its steady march of appreciation, which could well price some elements of the Australian economy out of the global economy and therefore act as a headwind to the recovery.
For now the issue is clearly not of concern, but we would not be surprised to hear some jawboning on the matter in coming weeks or months.