GBPAUD: Long Bias on Minor Retrace
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GBPAUD – Looking at the 200-Day Moving Average
Two currencies with different fundamental drivers and diverging monetary policy. Sterling is currently getting an uplift as investors begin to price in a soft Brexit after months of uncertainty and mixed messages. While nothing is ever certain, the PM’s heavy defeat earlier this week makes a no deal Brexit now highly unlikely, a boost for the British Pound. From a monetary policy perspective, a soft Brexit outcome would then turn attention to the Bank of England who are looking to tighten monetary policy. Any agreement would likely bring Q3 back into focus for a 0.25% rate hike with the potential for a second hike at the end of the year. On the other side of the trade, the Australian dollar continues to be rattled by fears of an economic slowdown in China, while a weak domestic house market may need rate cuts to stabilize a volatile market.
On the chart a pullback to the 200-day moving average, currently around 1.7860 would change the market bias to positive although a break below the 38.2% Fibonacci level at 1.7754 would start to negate this view. To keep a bullish bias, the 28.6% Fibonacci level at 1.8130 needs to be broken and closed above before the January 2 high at 1.8287 comes into view.
GBPAUD Daily Price Chart (May 2018 – January 18, 2019)
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