GBP/AUD came under selling interest on Thursday, after it hit resistance near the downside line drawn from the high of March 14th. The slide continued today as well, with the pair hitting the 1.8330 support, marked by the inside swing high of April 16th. The fact that the bears were encouraged to enter the action from near the aforementioned downside line suggests that some further declines maybe on the cards in the short run.
That said, before we get confident on that front, we would like to see a decisive dip below the 1.8300 barrier, defined by the inside swing high of April 23rd. Such a break may increase the chances for GBP/AUD to slide lower and perhaps challenge the 1.8210 zone. If that area fails to stop the bears, then its break could allow them to put the low of April 19th on their radars, at around 1.8135.
Shifting attention to our short-term momentum studies, we see that the RSI drifted lower after it exited its above-70 zone and now looks to be heading towards its 50 line. The MACD, although positive, lies below its trigger line and points south as well. These indicators suggest that momentum could turn bearish soon, which enhances our view that a possible break below 1.8300 could serve another round of selling.
On the upside, we would like to see a clear break above 1.8435 before we start considering the bullish case. Such a move would also bring the rate above the aforementioned downside line and could initially set the stage for a test near the 1.8535 level, marked by the high of April 4th. Another break above that high, could encourage the bulls to push the battle to wards the peak of the previous day, at around 1.8610.
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