AUD/USD, GBP/AUD prices, charts and analysis:
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Basic background of the Australian dollar
The Reserve Bank of Australia (RBA) has released minutes from its most recent meeting where the central bank implemented a further 25bps interest rate hike. The Australian dollar surprisingly faced a fall after a rise, but the minutes are surprising to say the least. The minutes of the meeting said the interest rate hike was aimed at reducing the risk of a “larger monetary policy response” given the persistently high inflation rate and strong economic conditions.
The minutes also show that inflation risks remain tilted to the upside, despite recent comments from Reserve Bank of Australia Governor Block that inflation has peaked. But the governor said getting inflation within target remained a challenge for the economy and could take up to two years. This is not surprising as I have always believed that inflation will never really go down far enough and that some items will continue to remain expensive while others may become cheaper. I expect some of the recent global inflation pressures to take hold, so the coming months should be particularly interesting for central banks.
The Australian dollar has remained relatively steady since its initial decline following the interest rate hike. I expect this to continue as Governor Bullock has hinted that the economy remains very strong due to strong demand. Block said the labor market is expected to remain strong, which could keep the demand side as well, potentially posing an upside risk to inflation.
Looking at interest rate comparisons, the RBA is still in a good position to raise rates again if it deems it warranted. As you can see from the chart below, the RBA still enjoys the lowest interest rates compared to the UK, EU and US.
Source: TradingView
A while back, Judo Bank’s preliminary PMI figures for the manufacturing and services sector were released, and there was some data. Manufacturing and services were both down slightly from October’s data, but there appears to be little direct impact on the Australian dollar.
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How to trade AUD/USD
Price action and potential setup
australian dollar usd
AUDUSD has continued its impressive rally since the central bank raised interest rates, with an initial selloff to retest support at the 0.6350 mark. Since then, AUDUSD has exploded to new highs and maintained its overall bullish structure.
AUDUSD also maintains a long-term downward channel, but it may be difficult to continue pushing from here without some form of retracement. The 200-day moving average is providing resistance at the 0.6600 level. The problem for sellers is that there is still plenty of downside support that could prevent a sustained decline. In addition, we are paying attention to the cross where the 20-day moving average line exceeds the 100-day moving average line, and it seems that a golden cross pattern may be developing, indicating the possibility of bullish continuation.
Personally, I would like to see some form of retracement here before potentially joining the trend since we just made a new high. We will keep an eye on the support at 0.6484, 0.6440, and 0.6400 for potential long opportunities. A change in structure would require a break and a daily candle to close below the 0.6350 mark, which would invalidate the bullish setup.
Key levels to note:
Support level:
Resistance level:
Australian dollar/USD daily chart
Source: TradingView, created by Zain Vawda
GBPAUD
GBPAUD has been range-bound for most of the last two months. A range of 400 pips is quite large for many pairs, but not for exotics like GBPAUD. As it stands, there are clearly defined ranges and several key areas of support and resistance that can be used for potential opportunities in the near term, which we will highlight below.
Downside support lies at the 1.9000 handle and just below it at the 1.8950 mark. A dip could lead to a slight spike to take advantage of the 200-day moving average at 1.8911.
Key levels that could provide potential short resistance would be the 1.9211 area and then the 1.9278 area before the high range at 1.9338 comes into focus. All these levels could provide potential short opportunities. Because a breakout only improves the risk-to-reward ratio.
GBP/AUD daily chart
Source: TradingView, created by Zain Vawda
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change |
long |
shorts |
OI |
every day | 3% | -8% | -2% |
weekly | 1% | Five% | 2% |
— Written by Zane Vowda DailyFX.com
Contact and follow Zain on Twitter: @zvawda