Australian dollar continues to be crushed on the crosses as long-term outlook for British pound over AUD improves

 Driving the decline in the Australian dollar (Currency:AUD) today was a miss on the Australian Trade Balance data which missed their mark.

"But the selling was caused primarily by momentum and leveraged funds who piled into the short position once the key 9500 area support gave way," says Boris Schlossberg at BK Asset Management.

A look at the latest spot rates shows:

GBP-AUD 0.8 pct higher @ 1.6274.
AUD-USD 0.54 pct lower @ 0.9491.
EUR-AUD 0.66 pct lower @ 1.3815.
AUD-NZD 0.18 pct down @ 1.1953. See our latest report on the Kiwi here.

Please note that the above are spot market quotes to which your bank will add a discretionary spread. However, an independent FX provider will guarantee to beat your bank's offer, thus delivering more currency. Please learn more here.

British pound has the advantage over Australian dollar thanks to PMI data

The British pound has found favour at the expense of the Australian unit as of late courtesy of strong PMI data.

Greg Gibbs at RBS says:

"PMI data in Australia is not closely watched, but the services PMI is one of the better ones and it fell for a second month in a row in May to 40.6, a low since April 2012.

"Contrast this with the UK services PMI that rose to 54.9 a high since March-12. It is not hard to see why some traders might be looking at a sell AUD buy GBP strategy.

"It is hard to argue other than the divergence in PMIs is to a large extent a reflection of a high AUD dampening confidence in Australia and a low GBP helping underpin confidence in the UK."

Outlook for the pound improves, more losses for AUD now forecasted

Gibbs goes onto say the longer-term picture is starting to swing back into favour for the GBP:

"AUD/GBP is currently trading below the low in 2012. This is suggesting that it is putting in a major long term topping pattern.

"The near term outlook for GBP is far from clear. Recent economic reports have strengthened giving hope that the economy is on an improving path thus lessening the chances of further QE.

"Nevertheless, it is still a long way below potential and policy makers may yet still look to bolster the recovery with more QE or rate guidance when Carney takes over the helm of the BoE in July. Nevertheless, the bigger picture sentiment for the AUD has now more clearly down-shifted and recent economic reports in Australia have deteriorated."

Beware: Australian dollar could be squeezed higher

For those readers who are inclined to believe that it is just one-way traffic lower for the Australian dollar from here be warned - when too many bets are placed on such an eventuality we are liable to see 'squeezes' in the opposite direction.

"AUD has probably already factored in recent negative news and shorts are vulnerable to a squeeze. We could be in for a choppy few months, and reverting to a degree of range trading may be the best strategy. In which trade location becomes more important," says Greg Gibbs at RBS.