Technical Sentiment: Bearish
Key Takeaways
- Cable will remain slow until the CPI, Producer Price Index and Retail Price Index releases on Tuesday;
- 1.8000 is the key level to be watched today and tomorrow.
Last week Cable rallied against the Australian Dollar before price had a chance to touch the 200-Day Simple Average, only to end the rally right on the 1.8000 handle. The technical bias remains bearish below this, yet the landscape could drastically change on a bullish break-out if U.K.’s economic indicators do not disappoint.
Technical Analysis
GBP/AUD mustered the strength to form a Higher Low last week on the Daily time frame. If this Low at 1.7830 remains intact and the pair continues above 1.8000, traders who are positioned for a deeper downtrend continuation will have an unpleasant surprise in the coming weeks.
No wonder the market has shown a lot of restrain around 1.8000 in the last trading days, as this line appears to be the separation point between bullish and bearish territory. The 50 and 200 Simple Moving Averages are located in this area on the 4H time frame, together with 38.2% Fibonacci Retracement from May’s High of 1.8293 down to last week’s Low of 1.7830 and the resistance trendline for this particular bearish movement.
On the Daily chart Stochastic is exiting oversold territory; consequently a bullish break-out could grind higher for a decent period before the pair enters overbought conditions. The first resistance above 1.8000 is the pivot zone at 1.8047, followed by 61.8% Fibonacci Retracement at 1.8116 and ultimately May’s top at 1.8293.
If by the end of tomorrow GBP/AUD fails to break above 1.8000, then the pair will remain in bearish territory leading to a proper test of the 200-Day Moving Average and possibly even 1.7735.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
