GBP/AUD Could Hit 2.05

GBP/AUD Could Hit 2.05

GBP/AUD Could Hit 2.05

The British pound started the week strong, trading to its highest level versus the Australian dollar in 6.5 years. While the currency pair gave up part of its gains to end the day unchanged, we are looking for further strength in GBP/AUD. This is a busy week for sterling with a number of important U.K. economic reports scheduled for release. While the BoE minutes may be mixed, economists are looking for stronger data all around but we are skeptical especially on job growth because the PMIs reported lower employment growth in the service and manufacturing sectors. Good numbers could drive sterling sharply higher but the next catalyst will come from Down Under. The RBA minutes are scheduled for release this evening and if you recall, earlier this month, RBA Governor Glenn Stevens said the central bank is open to further easing if it will be beneficial to sustainable growth. He felt that the currency was too strong and needed to fall further. We expect the minutes to echo these cautiously dovish views and encourage A$ traders to erase some if not all of today’s gains.

Technically, resistance for GBP/AUD is at the June 2008 low of 2.03. If this level is broken, then it should be clear sailing to 2.05. Support is much closer at today’s low of 1.9970, slightly under the psychologically and technically significant 2.0 level.

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