GBPAUD is trending lower in today’s trading thanks to better-than-expected data from Australia. The currency pair is down by over 40 pips from its opening price as it trades at 1.9006. The news also resulted to a rise in the AUD to GBP exchange rate. It is currently up around 0.25% at 0.5261 for the day.
According to the Australian Bureau of Statistics, retail sales in November rose by 0.9%. This figure was much higher than what analysts had expected at 0.4%.‘Black Friday’ sales are said to have significantly contributed to the pick-up in consumer spending. Analysts also credit the RBA’s efforts in stimulating the economy for the positive report. Remember that the central bank cut rates in June, July, and October 2019.
Additionally, the reading for October was upwardly revised from 0.0% to 0.1%.
Consequently, the report spurred demand for the AUD to GBP exchange rate (bearish for GBPAUD) because it instills confidence in the Australian economy. In fact, the report may even help convince the RBA from cutting rates soon. Or is it?
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On the 4-hour time frame of GBPAUD, we can see that the currency pair is currently testing support at the rising trend line around the 1.9000 handle. Reversal candles around this level would hint that the positive retail sales report is not enough to sustain the recent rally in the Aussie. In fact, GBPAUD may soon re-test its recent highs at 1.9152.
On the other hand, a bearish close below the trend line and the psychological handle would suggest that expectations for a rate cut from the RBA are lower. Sellers would need to sustain a downward move below support at the 100 SMA at 1.8922. If this happens, the next support level for GBPAUD will be at last week’s lows at 1.8775.