- GBPAUD trades at 10-month high as BoE meets
- Aggressive upmove from the early July lows
- Stochastics close to sending a bearish signal
GBPAUD is trading lower today, a tad below the 1.9672 level, and close to a 10-month high as the Bank of England meets today with strong chances of announcing a rate cut. It has been an impressive move higher from the early July lows as GBPAUD has completed 15 green candles in the past 16 trading sessions, partly on the back of concerns about the Chinese economy negatively impacting on the AUD. The convergence of the simple moving averages (SMAs) is probably an indication that the recent heightened volatility could have legs.
In the meantime, momentum indicators are mostly on the bulls’ side. More specifically, the Average Directional Movement Index (ADX) has climbed to a multi-year high, highlighting the scale of the recent upleg. Similarly, the RSI jumped to a 3-year high, but it now looks unable to record another higher high. Interestingly, the stochastic oscillator is probably preparing to drop below its overbought territory (OB). Should this move take place, it would be seen as a strong bearish signal.
Should the bulls remain confident, they could try to lead GBPAUD above the 78.6% Fibonacci retracement of the August 17, 2023-December 27, 2023 downtrend at 1.9672. If successful, the path could then be clear until the August 17, 2023 high at 1.9968.
On the flip side, the bears are desperately trying to recoup part of their recent strong losses with the first step being to push GBPAUD towards the 1.9440-1.9521 area, which is populated by the December 16, 2019 high and the 61.8% Fibonacci retracement. They could then test the support set by the 50% Fibonacci retracement at 1.9277, with the ultimate target being the key 1.9097-1.9218 area.
To conclude, following an aggressive upleg, today’s BoE meeting could potentially result in the first strong correction in GBPAUD, but it will most likely not threaten the recent uptrend.
Source by: XM Global