Pound Australian Dollar Exchange Rate Forecast: Will GBPAUD Continue to Uptrend This Week?

December 11, 2016 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate Forecast: Will GBPAUD Continue to Uptrend This Week?

The Pound Australian Dollar (GBP AUD) exchange rate fell back from its best levels late on Friday as foreign exchange markets reacted to a rise in Chinese inflation.

Pound Australian Dollar (GBP AUD) Recovers

Last week, the economic data between the UK and Australia showed divergence. While the UK’s data was strong, the Australian data was below expectations.

While the UK economy continues to be resilient after the Brexit referendum, the Australian GDP contracted by 0.5% in the September quarter, which leaves the YTD GDP at only 1.8%.

"This is the second-worst economic growth result in 25 years," Labor treasury spokesman Chris Bowen said. "It's only the fourth negative quarter since 1991, and on the only other occasions there were good reasons. In 2011 it was dealing with Cyclone Yasi in Queensland, in 2009 it was the greatest international downturn since the Great Depression, and in 2000 it was the aftermath of the Sydney Olympics. It is also the case that this figure is worse than 2011, worse than 2000, and comparable with 2009, in the middle of the global financial crisis," as quoted by The Sydney Morning Herald.

Deficits of the UK and Australia diverge

The UK’s trade deficit in goods and services narrowed in October boosted by exports.

However, Chris Williamson of INH Markit pointed that the export volumes fell by 2.1%, while imports rose by 4.4% in October, which is a”big disappointment”. Considering the sharp fall in the sterling, it should have been the other way round.

On the other hand, Australia’s trade deficit widened in October with imports exceeding exports by $1.54 billion, whereas, economists’ expected the deficit to narrow sharply supported by the rally in commodity prices. Tapas Strickland, an economist at the NAB said that the deficit was due to increased capital goods imports and “delay in higher commodity prices flowing through to the export values”.

How to trade the GBP/AUD next week?

The GBP/AUD is in a recovery, which can extend to the downtrend line if the pair takes support at the 20 and the 50 day exponential moving average.

Hence, traders should look to go long if we see a bounce from the moving averages.

On the other hand, if the pair breaks down below the moving averages, traders should avoid going long, until a new support level holds.

AUD/USD Forex Forecasts

Société Générale suggest the Australian dollar could see a retracement in the near-term:

"AUD/USD has been undergoing a choppy rebound after forming provisional bottom near 0.6750/0.65."

"Break above multiyear channel at 0.7830 remains essential for positive signals."

"Short term, it has confirmed a double top and looks poised to drift towards 0.7285 and even towards May lows of 0.7140/0.71."

Current Banking Exchange Rates

At the time of this update the AUD/GBP exchange rate was trending around 0.59292 and the GBP/AUD exchange rate was trending around 1.68657.

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TAGS: Australian Dollar Forecasts Currency Predictions