Halo Financial Team
Halo Financial
Sterling Australian Dollar (GBPAUD) FX Technical Analysis
_20151002222935.jpg "GBPAUD (2)")
The aggressive rally in GBPAUD over the last few months’ comes to an end, it’s been consolidating throughout September in a 2.14-2.20 range after breaking up through 2.14 resistance in late July. On the longer term chart this does look like a this is a pause before another rally but I certainly can’t guarantee that is the case. We’ve witnessed a change in the pounds’ fortunes in September and I do wonder if there’s more downside for Sterling in October. UK economic data has been consistently below expectations and the pound has lost ground against most major currencies over the last few weeks. Manufacturing, construction and service sector data disappointed, the largest contributor of which, the service sector came in at the lowest level in 2 years. Added to that inflation has also slowed pushing back expectations for the first rate increase from the Bank of England to the end of 2016 . Only a few months ago the market was pricing in the first hike as early as Dec 2015, even Bank of England Governor Mark Carney warned that interest rates were heading higher sooner than the market expected. Like the US then, the UK finds itself scrabbling for signs of growth as the IMF’s Christine Lagarde warns again today that the global economy is slowing.
Over in Australia Labour ousted Tony Abbott - replacing him with Malcom Turnbull which the market reacted to favourably and the Aussie dollar was buoyed on the news. RBA Governor Stevens sounded a bit more upbeat at the semi-annual testimony before the House of Representatives Committee, having a go at the media on their coverage of the economy as “more negative than the facts actually warrant”. That pushed back bets of another rate cut from the RBA when previously the market was pricing in at least 1, perhaps 2 more cuts. Yesterday Chinese manufacturing data beat expectations and showed that China’s factory sector shrank at a slower rate than in the previous month which boosted the Aussie further.
Technically GBPAUD needs to hold the 2.14 level to remain within the sideways range. If it were to break to the downside it will open up 2.08, 2.05 and then 2.00 so worst case scenario could see a 3-7% fall over the coming months. Not panic stations yet for our Aussie buyers but certainly caution may be warranted. On the upside a break of 2.20 would open up longer term target of 2.25 onto 2.40 which may take months/years.
Buyers
Keep an eye on 2.14, if you are looking to target rates up towards 2.20 then you may wish to consider have a safety net below the market, a stop loss order will serve that purpose and your Halo consultant can explain how they work. On the topside 2.17-2.18 would be sensible first target price and then another portion at 2.20.
Sellers
For the first month in many you’re not faced with a weakening Aussie, a cause for celebration! Look to sell initially at 2.16 and if a break of 2.14 occurs, target 2.10 and 2.07
The aggressive rally in GBPAUD over the last few months’ comes to an end, it’s been consolidating throughout September in a 2.14-2.20 range after breaking up through 2.14 resistance in late July. On the longer term chart this does look like a this is a pause before another rally but I certainly can’t guarantee that is the case. We’ve witnessed a change in the pounds’ fortunes in September and I do wonder if there’s more downside for Sterling in October. UK economic data has been consistently below expectations and the pound has lost ground against most major currencies over the last few weeks. Manufacturing, construction and service sector data disappointed, the largest contributor of which, the service sector came in at the lowest level in 2 years. Added to that inflation has also slowed pushing back expectations for the first rate increase from the Bank of England to the end of 2016 . Only a few months ago the market was pricing in the first hike as early as Dec 2015, even Bank of England Governor Mark Carney warned that interest rates were heading higher sooner than the market expected. Like the US then, the UK finds itself scrabbling for signs of growth as the IMF’s Christine Lagarde warns again today that the global economy is slowing.
Over in Australia Labour ousted Tony Abbott - replacing him with Malcom Turnbull which the market reacted to favourably and the Aussie dollar was buoyed on the news. RBA Governor Stevens sounded a bit more upbeat at the semi-annual testimony before the House of Representatives Committee, having a go at the media on their coverage of the economy as “more negative than the facts actually warrant”. That pushed back bets of another rate cut from the RBA when previously the market was pricing in at least 1, perhaps 2 more cuts. Yesterday Chinese manufacturing data beat expectations and showed that China’s factory sector shrank at a slower rate than in the previous month which boosted the Aussie further.
Technically GBPAUD needs to hold the 2.14 level to remain within the sideways range. If it were to break to the downside it will open up 2.08, 2.05 and then 2.00 so worst case scenario could see a 3-7% fall over the coming months. Not panic stations yet for our Aussie buyers but certainly caution may be warranted. On the upside a break of 2.20 would open up longer term target of 2.25 onto 2.40 which may take months/years.
Buyers
Keep an eye on 2.14, if you are looking to target rates up towards 2.20 then you may wish to consider have a safety net below the market, a stop loss order will serve that purpose and your Halo consultant can explain how they work. On the topside 2.17-2.18 would be sensible first target price and then another portion at 2.20.
Sellers
For the first month in many you’re not faced with a weakening Aussie, a cause for celebration! Look to sell initially at 2.16 and if a break of 2.14 occurs, target 2.10 and 2.07
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