GBP/AUD Looking to Take Out 1.7700

GBP/AUD Looking to Take Out 1.7700

Fundamentals

After failing to break above the yearly highs cable has started to drift lower again and tomorrow’s inflation data could only exacerbate the correction in the pair if it comes in low as expected. After year of running inflation above the BoE target UK is finally enjoying lower price levels. In fact PPI data is projected to come in negative once again as wholesale costs continue to decline. While that is good news for business and consumers it is bad news for cable bulls because low inflation takes away any pressure for BoE to act. Meanwhile in Australia the RBA minutes are likely to confirm that the Australian economy is recovering nicely and therefore the RBA will remain stationary despite the fact that Aussie has rebounded strongly. That is likely to put further pressure on GBP/AUD and push the pair below the key 1.7700 support.

Technicals

GBP/AUD has carved out a broad head and shoulders pattern over the past several months and the pair now faces the prospect of breaking below the 1.7700 shoulder which could lead to a quick move lower to 1.7500. A hold here could see a rally to 1.8000 as short covering kicks in.

Chart Of The Day

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