Image © Adobe Images
The British pound looks set to cool against the Australian dollar this week, though dips should prove shallow and the uptrend stays intact.
The Pound to Australian Dollar exchange rate jumped to 1.9228 on Thursday, its highest level since early August, and the pullback that followed fits our expectation that the coming days will see some of that heat let out.
Once the pair has cooled, we see the door open to fresh pushes higher later in the week and into the final sessions of October.
From a technical perspective, GBP/AUD trades above its 21-day moving average, shown in blue on the chart below, and its 100-day, in red, with the pair of them pointing higher, a constructive setup under our tactical approach:
GBP/AUD daily chart. Image © Pound Sterling Live, chart created with TradingView.
GBP/AUD opens the new week at 1.9104, beneath Friday's close at 1.9189.
Thursday's rally left the pair more than 1% above its 21-day moving average, a stretch that invites a breather, and Monday's dip has already trimmed the gap to 0.7%.
The 100-day sits at 1.9029 and has turned higher this month after flattening through September. Beneath it lies graphical horizontal support at 1.9000, the purple line, a level that has acted as a pivot since June: a floor through July and August, then a ceiling through the first half of October.
A former ceiling backed by a rising average makes 1.9000 to 1.9029 a support band, and we expect dips this week to find buyers there.
The 21-day, at 1.8967, has gained about ten pips a day over the past week, and on that pace it would reach the band by Friday and add to its strength.
A return above Thursday's high at 1.9228 would open the way to the July high at 1.9362, the upper purple line, with 1.9402 beyond that.
We look for GBP/AUD to cool early in the week and hold above 1.9000 before fresh attempts higher develop into month-end. A daily close beneath 1.9000 would change our near-term Pound to Australian Dollar forecast and expose last Wednesday's low at 1.8891.
A week ago we described even odds at a flat 100-day, then at 1.9014, with a daily close above it the signal for an extension towards 1.9362. Wednesday's dip to 1.8891 breached the 1.8915 support we named, though only intraday, and Thursday's close above the 100-day delivered the bullish signal. The extension stopped 134 pips short of our target.
Risk-Off and a Jobs Miss Knock the Aussie
Australian employment fell by 39.3K in September against a consensus for a 20K gain, and the unemployment rate held at a cycle high of 4.7% against expectations for 4.6%. A print below consensus weighs on a currency, and a miss of that size hit the Aussie hard.
Market pricing for a November rate hike at the Reserve Bank of Australia fell from about 30% to about 10% after the data, according to Commonwealth Bank of Australia's Asia Open note of 16 October.
The same session brought a rout in technology shares, and Corpay ties the Aussie's slide in a note of 16 October to a broad risk-off episode triggered by doubts over AI capital spending and circuit breakers on South Korean equity markets.
How does a tech selloff reach the Australian dollar? The Aussie trades as a barometer of global growth and risk appetite, so when investors cut their exposure to equities they tend to sell it too, and GBP/AUD rises in those episodes.
The Nasdaq logged its worst week since June, says Westpac in its morning report of 19 October, and global markets look set to steer the pair more than local data in the coming days.
Daniella Arcadipane, Senior Currency Specialist at Indigo
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Talk to a specialistA Light Australian Calendar Puts the Focus on Sterling
October's flash PMI surveys are the only notable Australian release this week, and they are second-tier.
RBA Deputy Governor Andrew Hauser is scheduled to speak, and Commonwealth Bank of Australia says in its weekly FX strategy note of 18 October that "any hawkish comments will support AUD/USD, albeit temporarily in our view."
The bigger domestic test is the 28 October inflation report. "The mechanism to get inflation down then must be simply to weaken demand enough to convince firms that cost-plus will not fly in the market," writes Westpac chief economist Luci Ellis in the bank's Australia and New Zealand Weekly of 19 October.
For the pound, Tuesday's jobs data and Wednesday's inflation report, both due at 07:00, carry more weight, with consensus at 5.0% for the unemployment rate, up from 4.9%, and 3.4% for CPI, up from 3.1%. Inflation above consensus would support sterling and a miss would weigh on it; for unemployment, a reading above 5.0% counts as the miss.
CBA looks for AUD/GBP to rise towards resistance at 0.5260 this week, equivalent to about 1.9011 in GBP/AUD, on hawkish RBA commentary or weak UK jobs data.
That level sits inside our support band, and with global markets the main driver, we look for a cool-off that holds above 1.9000 and leaves the uptrend intact, consistent with our Pound to Australian Dollar forecast of shallow dips and fresh gains into month-end.
