And just like that, the RBA kept rates on hold for the THIRD statement in a row!
Can this mean a reversal for GBP/AUD?
On the short-term time frame, a double bottom formation can be seen, with the pair already testing the neckline resistance.
GBP/AUD 1-hour Forex Chart by TV
Earlier today, weaker than expected Chinese Caixin services PMI spurred a bout of AUD selling, taking this pair up to the resistance at the 1.9650 minor psychological mark.
After that, the RBA decision kept the Aussie pinned down, as the central bank kept rates on hold at 4.10% and noted that inflation in Australia has passed its peak.
In addition, policymakers highlighted below-trend growth in the Land Down Under, as well as uncertainties in their outlook possibly stemming from the downturn in China.
These fundamental factors might be enough to keep GBP/AUD supported, probably even triggering a break above the neckline and a rally that’s the same height as the chart pattern.
If that’s the case, GBP/AUD could be in for a sustained bullish run of roughly 150 pips, setting its sights on the ceiling at R3 (1.9780) or higher. While the initial reaction to the actual RBA event appears to be muted today, previous statements have seen the moves extended by a day or so.
Technical indicators aren’t so convinced, though, as the 100 SMA is still below the 200 SMA to reflect bearish pressure while Stochastic is indicating overbought conditions.
With that, reversal candlesticks around current levels AND a return in risk-taking in the latter trading sessions might be enough to drag GBP/AUD back to the lows near the 1.9500 mark.
There are no major catalysts lined up from the U.K. economy for the rest of the week, but it’s worth noting that the BOE remains committed to its tightening plans in an effort to ward off stubborn inflation.
One risk factor to watch out for in the coming days is Australia’s quarterly GDP release on Wednesday, as strong growth data might still revive calls for more rate hikes. Downbeat results, on the other hand, could mean stronger bullish vibes for GBP/AUD since these would underscore the central bank’s cautious view.
Do you think an uptrend is brewing for this pair or will it resume the slide soon?
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