GBP/AUD Forecast: Here’s the Path of the Least Resistance

Summary:
• The GBP/AUD price collapsed to the lowest level since October 2017 as concerns about the UK economy continued. What next for the GBP to AUD?

The GBP/AUD price collapsed to the lowest level since October 2017 as concerns about the UK economy continued. The pair dropped to a low of 1.6990, which was about 20% below the highest level in 2022. It has crashed by over 12% below the highest level this year.

UK economic concerns

The GBP to AUD exchange rate continued dropping as investors continued dropping this week as more analysts warned about the UK economy. In a report on Monday, analysts at Citigroup warned that the country’s inflation will start 2023 at 18.3%, which will be the highest level in almost 50 years. 

This estimate was higher than the one set by the Bank of England (BoE) and Goldman Sachs. The two expect the country’s inflation to start at about 13% and 15%, respectively. The main catalyst for this inflation will be the soaring wholesale gas prices. As a result, some analysts believe that UK could have some severe gas shortages in the coming months.

Additional data from the UK showed that the economy is seeing substantial strains. For example, the manufacturing and services PMIs declined sharply in July as companies continued warning about low demand and high costs.

The GBP/AUD price has dropped because the Australian economy seems to be doing better than the UK. Its inflation is slightly lower than that of most countries. Also, Australia is one of the leading producers of natural gas, meaning that its energy sector is a bit stable. Still, Australia is also highly exposed to the Chinese market, an economy that is slowing.

GBP/AUD forecast

The daily chart shows that the GBPAUD price has been in a strong sell-off in the past few days. As it dropped, it managed to move below the important support level at 1.7176, where it struggled to move below in April and May of this year. It also declined below the 25-day and 50-day moving averages. 

Therefore, the path of the least resistance for the pair is to the downside, with the next key support level being at 0.6900. A move above the resistance point at 1.7300 will invalidate the bearish view.