Breakout for GBP/AUD Exchange Rate, Next Targets Identified

On Thursday morning we warned GBP/AUD was trading an increasingly compressed range and warned a breakout was nigh. Hours later this occured - so where next?

The GBP/AUD exchange ratetrades at 1.6337 at the time of writing - well above the week's opening level of 1.6050.

Ahead of what turned out to be a super-Thursday for Sterling, the GBP/AUD exchange rate traded just above the important 1.61 band that forms the upper limit of the range it has traded in since mid-October.

Since mid-October the exchange rate has been wedged in an incredibly tight range with the lower limit being seen around 1.59:

We wrote ahead of Thursday that, "often when such compression occurs we see a resolution ultimately take place in the form of a break-out. Over the course of 2016 more often than not those break-outs have tended to be towards the downside as negative headlines surrounding Brexit are usually the trigger.

"However, GBP/AUD appears to be rising into the 1.161 resistance line which suggests momentum is mildly positive and a breakout higher could be possible."

The breakout has since transpired:

From a technical perspective we would imagine the rally could extend to the 1.64 region.

This forms a convenient round-number that traders are clearly targetting. Note how in early October this is where GBP/AUD settled on the day of the flash-crash.

We would imagine there will be a good supply of Sterling in the approach to this level over coming days.

However, a clearance of 1.64 would then take us back to the area just north of 1.66 where Sterling started ahead of the flash-crash.

Latest Pound / Australian Dollar Exchange Rates

	Live: 2.0109▼ -0.26% 12 Month Best: 2.1645
*Your Bank's Retail Rate	1.9425 - 1.9506
**Independent Specialist	1.9828 - 1.9908 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

Sterling Strengthens on Bevvy of Events

Sterling shot higher on Thursday November 3rd following news the UK Government lost its High Court case which sought to defend the Government's right to Trigger Article 50 of the Lisbon Treaty without the approval of Parliament.

Markets tend to like the idea of Parliament having more say in the Brexit process noting the pro-EU stance of the majority of MPs.

Sterling gained traction later in the day when the Bank of England announced it was revising higher its growth forecasts for the UK economy.

The Bank also struck a notably neutral tone, from the dovish tone we saw at the August Inflation Report.

Sterling was however firmer following the release of better-than-forecast Services PMI data from Markit and the CIPS.

“A game change of a week for Sterling had it up around 2.5% and on pace for its best since March,” says Joe Manimbo at Western Union. “The short-run game for the pound changed for the better after the risk of an economy-choking hard-Brexit receded after a U.K. court ruled that parliament would have to approve the government’s Brexit plan.”