Price Action Setups for GBP/AUD Following RBA Rate Hike

GBP/AUD CHARTS, PRICE AND ANALYSIS:

READ MORE: Australian Dollar Jumps as RBA Hikes; How Much More to Go For AUD/USD?

MONETARY POLICY AND INFLATION CONUNDRUM, RBA AND BOE

Markets appear to be experiencing a period of low volume and liquidity at the moment as market participants appear to be adopting a cautious approach. GBPAUD has been on my watchlist for the past month with today’s retracement setting up a key couple of days for the currency pair.

I still favor bullish continuation on GBPAUD mostly down to the hiking cycles of the two Central Banks while the economic pictures of the two countries also weighing favorably for the GBP. Following this morning’s surprise by the Reserve Bank of Australia (RBA) the Central Bank did keep the door open for further hikes with the bank likely to keep a close watch on the Q2 inflation number out in July.

Looking at the Bank of England (BoE) and market participants have pared back some of the hawkish expectations following the recent inflation data. Market participants are pricing in a peak rate of around 5.5% for the BoE later this year, which means another 100bps of hikes before a pause. We did get some UK data this morning with the British Retail Consortium (BRC) reporting a slowdown in retail sales in May, interesting however was the data on food prices which remains near a 46-year high, providing further ammunition to the BoE to continue their tightening cycle.

Source: Refinitiv

TECHNICAL OUTLOOK AND POTENTIAL SETUPS

On the weekly chart below, we can see the overall bullish trend still in play as we have staircased our way higher since bottoming out in September 2022. Last week saw GBPAUD print a massive shooting star candlestick at the psychological level around the 1.9000 handle. We have since continued to push lower following the RBA decision as the Australian Dollar began the day on the front foot.

There are a few potential entry opportunities here for would-be-buyers with immediate support resting at the 1.8500 mark. However, the ascending trendline may hold the key as GBPAUD looks for its third touch before potentially continuing higher. Despite the pullback we did have a golden cross pattern recently (50-day MA crossing above 200-day MA) which hints at the upside momentum in play and could work in the favor of potential longs.

GBP/AUD Weekly Chart – June 6, 2023

Source: TradingView

Dropping down to a daily chart and price is currently breaking below the 100-day MA as we approach the trendline. A daily candle close below the trendline would invalidate my bullish bias and potentially offer up short opportunities. A word of caution here as we do have the 200-day MA hovering around the 1.8250 handle and could serve as a strong area of support and cap further downside.

Alternatively, a push back toward the 1.9000 psychological level from current prices may offer a better risk-to-reward for potential shorts. As you can see there are favorable positions both from a long and short perspective with market dynamics over the coming days likely to hold the key.

GBP/AUD Daily Chart – June 6, 2023

Source: TradingView

Key resistance levels:

• 1.8865
• 1.9000 (psychological level)
• 1.9185 (YTD highs)

Key support levels:

Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda