UK data isn’t likely to change the new dovish bias of the BoE. The GBP has moved up in recent days as concerns over a Brexit have been reduced for now. However, the GBP should get a boost of volatility as we get closer to the U.K. and the E.U. summit next week.
The main risk for the AUD is a weakening China and the fact that future intervention from the RBA to devalue the AUD is still in the cards.
Technically, the GBPAUD trades systematically within the multi month downward sloping price channel; current price also trades below its long term moving average with no clear signs of a price reversal. My conclusion for GBPAUD traders is to trade within the downward direction of the channel. Entering short positions near the top of the channel line for a medium term target around the June 2015 lows ( 1.9660’s); provided price can break below the January lows (1.9980). However, traders should remain on alert to abort short positions upon any potential upward channel line price penetration.
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Senior Currency Strategist
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