GBP/AUD is currently unfolding in a bearish measured move, also known as an a-b-c-d pattern, lower.
Waves a-b and b-c have already unfolded and now it is time for the final c-d move down to play out.
The c-d leg is likely to take the pair down to a target at 1.6000.
We would, however, first be seeking confirmation from a break below 1.6189 lows first.
Nevertheless, assuming such a break occurs there is a high chance of a continuation lower to the aforesaid 1.60 target.
Data, Events this Week for the Australian Dollar
The data highlight in the coming week is likely to be Australian Employment on Thursday, February 16 at 00.30 GMT.
Analysts estimate the Unemployment rate remaining at 5.8% and employment change showing an increase of 10k jobs in January. Tuesday, February 14 sees the release of Westpac’s Consumer Confidence at 23.30 and NAB Business Confidence in January at 00.30.
Tuesday, February 14 sees the release of Westpac’s Consumer Confidence at 23.30 and NAB Business Confidence in January at 00.30.
The market may well also closely follow commentary from Reserve Bank of Australia (RBA) officials Heath on Tuesday at 20.50 and Ellis on Wednesday at 22.00, for signs of the sort of optimism expressed by Governor Lowe last week.
The RBA meeting minutes will likewise be scrutinized for more evidence of policy stance after the more optimistic statement and recent commentary have suggested a change in the outlook.
Data, Events this week for the Pound
Inflation data for January is out at 9.30 on Tuesday, February 12, with analysts estimating a rise of 1.9% from the previous 1.6%.
The Bank of England will only raise interest rates should inflation be seen to be rising faster than they expected, and if markets see the prospect of higher interest rates on the horizon they will start bidding the Pound higher.
However, a rise in inflation is forecast due to the impact of the weaker Pound which has increased the cost of imports.
However, inflation is rising across the world at present as oil prices recover from record lows.
Therefore the Bank of England will look through any rise in inflation should they be due to these factors.
That is why markets will be watching instead is the core inflation rate - that element of the inflation picture that is due to economic growth, and wage rises in particular.
Therefore, what markets will instead be looking at is the core headline figure which is forecast to rise by 1.8% year-on-year in January, up from 1.6% in December.
Should the core level rise faster than expected then markets might take a bet that the Bank will be looking to raise interest rates sooner than they indicated in their February Inflation Report.
We heard last week that outgoing MPC member Kristin Forbes believes that an interest rate is actually warranted owing to the resillience of the UK economy.
If inflation beats expectations then perhaps other members of the MPC will share Forbes' view.
With wage data being so important then, expect market focus to turn to jobs and earnings data due out on Wednesday.
Average earnings will be in focus with 2.8% growth in wages being forecast. If this beats expectation then Sterling could be bid higher.
Watch for the unemployment rate to stay unchanged at 4.8%.
The Bank of England believes the economy's full employment threshold lies at 4.5%, the sooner this level is reached the sooner rates will likely rise.