The Australian Dollar has benefited from higher global equity markets and higher prices for industrial commodities, especially copper and iron ore, after China eased restrictions. The 7-day average of new Covid cases in China indicates the possibility of additional easing, which could contain the slowdown in China’s economy, and the strengthening of the Australian Dollar may be closely related to the decline in Covid virus infections on Tuesday. China’s PMI is expected to recover in the next month, but further domestic economic disruption cannot be ruled out, as long as the zero Covid policy remains in place.
The Australian Dollar was the best performer in the G-10 group on Tuesday, while Sterling almost bottomed out, having weakened against the Yen and the Euro. The GBPAUD exchange rate is retreating from near 3-month highs and risks sliding back to the downside, due to the Pound’s poor performance against many of its major peers, while the AUD alongside the CAD is far superior.
Technical Overview
GBPAUD’s decline from its 1.9220 peak has stalled at the structural support in the 1.7173 price zone. The pair has been trading in consolidation for the past 3 months, between a low of 1.7173 and a high of 1.7886. On the daily chart, the price pattern that is forming has been converging to the right side, with lower highs and higher lows, since last May. The 1.7173 support is a 5 year low, offset by the 2018 low. A move below this price level would confirm a further downtrend with projections to FE 61.8% at 1.6621 of the 1.9220-1.7173 and 1.7886. However as long as the support at 1.7173 holds, the price will remain in consolidation mode, unless there is a break to the upside of the resistance, then there is a possibility of a retracement to the 50.0% FR level at 1.8192, but the asset must first surpass the 200-day EMA, which is seen between the 38.2 % FR and 50.0% FR.
GBPAUD, H4 – While the intraday bias looks neutral, stuck at the 200 EMA, a move to the upside will test 1.7814, although the price structure looks a bit heavy. A move to the downside must go beyond the 1.7496 support to reach the lower supports 1.7306 and 1.7173.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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