GBPAUD Fibonacci range

The Pound and the Aussie Dollar pair have been respecting some Fibonacci lines as they form a ranging pattern over the last three months. If the current line holds, we should see a movement down, but be wary of the Bank of England.

Drawing a line from the top hit in late February to the low in early April gives us our Fibonacci lines. From here the GBPAUD pair has looked to test the 50.0% without much success, however, the two that provide most interest are the 38.2% and 23.6% lines.

As you can see on the daily chart above the 38.2% and 23.6% lines have become support/resistance lines on several occasions. The price is currently sitting just under the 38.2% line after Australian Unemployment data disappointed the market. The Unemployment rate jumped from 6.0% to 6.4% which the AUD felt heavily. Yesterday it was the Pound that had a grim day as Manufacturing Production missed estimates of a 0.6% rise m/m, coming in at just 0.3%.

At present on the shorter timeframe charts we can see the price has already tested and rejected off this level of resistance. It would not be out of the realms of possibility to see another test of this level before it properly rejects off and heads down to the 23.6% level. This could provide an entry point for traders looking to take this pair short.

Both the Stochastic Oscillator and the RSI look to be finished with the oversold level and are heading down, with the two lines of the Stoch looking to cross over. These are both bearish signals and could point to a bounce off the 38.2% level with a top of 1.8146.

It must be said that there is one enormous caveat with going short on the pound, and that is the Bank of England meeting to decide interest rates. It is well known that interest rates have not moved in several years from the historic low of 0.5%, however, the talk has become more about ‘when’ not ‘if’ interest rates rise. Votes from the last Monetary Policy Committee (MPC) meeting show all votes as neutral; this is a change from the partially dovish votes of previous meetings and shows the changing attitude of the MPC which will eventually lead to interest rate rises. No one is expecting a rise today, however, they could outline a timeframe to do so; in which case the pound will smash through the 38.2% line, so it is important to set your stop losses to protect your capital.

The GBPAUD pair has been ranging between the Fibonacci lines and a bounce lower could be on the cards. Keep an eye on comments from the Bank of England as this will no doubt add volatility.