GBPAUD, 60 min
UK think tank NISER think sterling could fall 20% in the event of Brexit, which would cause a “significant” economic shock that would trim 0.8 of a percentage point of growth in 2017 and weaken GDP by between 1.5% and 7.8% by 2030. Currency weakness would then lead to a 2-4 percentage point rise in inflation, and the group even reckon that exports wouldn’t benefit due to lost access to EU markets. “Leave” supports will be chomping at the bit to refute these claims. The referendum is now just over six weeks away. UK bookmaker Ladbrokes is presently giving 71% odds for the UK remaining in the EU.
The worst Brexit fears evaporating has supported GBP lately. At the same the AUD has been hit by the RBA’s trimonthly Statement on Monetary Policy, which slashed forecasts for underlying inflation to 1-2% for 2016 from 2-3%. GBP has now been strengthening against AUD for over three weeks in a row. This has lifted the pair over 6.9% since April 18th. In the daily timeframe this has mean market rallying higher with only a couple of down days and Stochastics moving above the overbought threshold. GBPAUD is getting nearer a significant resistance area at 1.9890 – 1.9995 that has potential to turn this pair lower again. However, this level is still some way off and the pair is still trending higher. I’m seeing support at 1.9520 – 1.9560. This area coincides with 4h Bollinger Bands and 30 period SMA. I’m looking for long entry signals inside this buy area with Target 1 at 1.9694 – 1.9740 and Target 2 at 1.9795 – 1.9820
Janne Muta
Chief Market Analyst
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