GBPAUD Q3 update
With so many influences ready to shunt the Sterling – Australian Dollar exchange rate to and fro over the last 3 months of the year, predicting with any kind of accuracy is practically impossible. Knowing what to look out for, is more achievable though and so is our ability to see what the charts are telling us.
In brief, Brexit will come to a head at the end of December but the Brexit trade deal will either be agreed or not well before the December 31st exit date. You will already have seen just how impactful comments and rumours can be with something as historic as this and we have seen the Pound whipped around by little more than a terse comment from one of the negotiators or their supporters. No one has a crystal ball to indicate whether a deal that is acceptable to the majority can be achieved. So if and when an announcement is made, the markets will react, rather than have time to position themselves.
Meanwhile, the US has an election in November; the outcome of which will swing the US Dollar one way or another. Australia’s exports are heavily influenced by demand for commodities and that can be directly affected by America’s attitude to external suppliers.
And it must be remembered that Australia’s number one export market is China, which is simultaneously trying to recover from the global economic impact of COVID-19 and also battling the US over trade and tariffs.
Add in the battle raging over how to deal with the impact of COVID-19 and the measures being taken by the RBA and BOE to try to stimulate growth, as the scene is set for a lot of uncertainty.
The Sterling – Australian Dollar exchange rate will be volatile over the coming months and the ranges are shown below but two things are certain; a positive announcement on a trade deal between the UK and EU will boost the Pound and an upsurge in commodity demand will boost the Australian Dollar. Everything else is in the lap of the gods.
As you can see from this chart, this exchange rate dropped below w 4 year trend line in September but recovered and is back above the support (currently around 1.7950). If the Pound gains support or the Aussie is sold due to negative data or news, there will be AUD buyers along the Fibonacci resistance level at 1.8280. A break of that line opens up a rush to 1.8780. The MACD lines at the bottom show a propensity to move higher at this stage, so that is currently the most likely scenario and many analysts see that as the path for the Pound as long as a trade deal can be done between the UK and EU.
For AUD Buyers
Buy on spikes to 1.8280 in the short term and 1.8780 if seen in the medium term. Place protective stop losses below 1.75; the low we say in September.
For AUD sellers
Any test of 1.7950 is a good short term GBP buying opportunity. If that breaks, there may be chances down at 1.75 but that should be the floor in this pair unless the Brexit talks are cancelled. If Sterling can force its way back up to 1.88 and above, the upward trend is well established and higher rates are very likely; not what you want obviously.