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TREND IN FOCUS: GBPAUD (D1)
- The GBPAUD has the strongest momentum score at the moment at +4.00, and has increased over the past week-plus from +3.86.
- The uptrend off of the April and May lows remains intact, and the consolidation seen from mid-June through late-July turned out to by a Bull Flag.
- Despite weekly RSI remaining deeply overbought, the weekly Slow Stochastics (5,3,3) turned higher again on last week’s close; further gains should be expected given strong momentum.
In light of upcoming event risk for the Australian Dollar and the British Pound, I suspect the following:
- The GBPAUD could trade higher into A$1.7373, the 23.6% Fibonacci retracement of the 2008 high to 2013 low, after the Reserve Bank of Australia cuts its key interest rate on Tuesday.
- If the RBA retains a dovish tilt (guidance), the rally could trade higher towards 1.7600, where the GBPAUD found resistance in August 2010 before leaving the area for good until now.
- The pair could see a near-term reversal after Wednesday if the Bank of England implements benchmark-driven forward guidance.
- In the event of a pullback, channel support comes in as low as 1.6750/800.
*Trend definitions: “uptrend” is defined as 8-MA>21-MA>55-MA; “downtrend” is defined as 8-MA<21-MA<55-MA; a “trendless” market occurs when continuity is absent.
*Scoring methodology: there are seven time frames, ascending from m15 (15-minutes) to W1 (one-week). In ascending order, each pair is assigned a value from -7 to +7 based on the trend apparent on the specified time frame (I.E. a m15 uptrend equals +1, whereas a H1 downtrend equals -3). If neither an uptrend nor downtrend is present, the trendless timeframe receives a score of 0. These points are totaled and the average is reported on the right. The strongest uptrend would achieve a score of +4.00, while the strongest downtrend would achieve a score of -4.00.
--- Written by Christopher Vecchio, Currency Analyst
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