With the option of a more flexible RBA and a more aggressive BOE, the GBP / AUD pair may have more volatility in the forex market this week than other currency pairs!
After the UK fully renewed restrictions on Covid-19 on July 21, the pound rose. The resumption of work has gone well so far, with reports of declining coronavirus cases in the UK, unlike many other countries around the world where the number of new cases is on the rise every day. The leadership of the coronavirus, especially the Delta option, will be one of the main topics discussed at the Bank of England meeting on Thursday. Deputy Governor Ramsden and MPC member Saunders said they would like to start managing the bond buying program as soon as possible, as inflation reached 2.5% in June and is expected to temporarily rise to 3%. The current UK bond buying program will end at the end of the year. However, with the UK exit program ending on 30 September, the committee may not rush to further downsize, awaiting additional data after the program ends. Economic forecasts are also expected at the meeting, and it will be important to keep an eye on inflation and GDP forecasts.
After more than a year of containing the coronavirus, Australia has been particularly hard hit by the Delta variant. Sydney has been in quarantine since June 26, which has been extended indefinitely. Soldiers are currently patrolling the streets to enforce Household Rule. In addition, Brisbane is currently on lockdown. The lock was supposed to expire on Tuesday; however, it has been extended until Sunday. This is a tough decision for the RBA to meet on Tuesday. The RBA is in decline, cutting asset purchases from AU $ 5 billion a week to A $ 4 billion a week. However, with the fall in PMI, retail sales and employment in June, and rising inflation in the second quarter, the RBA may need to change direction and increase bond purchases this month to support the market economy. With the rise in coronavirus cases harder than expected, recent poor economic data could lead to an increase in central bank bond purchases.
On the weekly chart, the GBP / AUD pair has been trading forex in a symmetrical triangle since March 2013. More recently, in the fall of 2020, the pair exited the upper trendline of the triangle to test the lower trendline close to 1.7416 and is holding. Since then, GBP / AUD has rebounded and crossed the 38.2% Fibonacci retracement level from March 2020 highs to January lows around 1.8738. The next resistance higher in the weekly calendar is the 50% retracement level of the same bearish calendar at 1.9148.
GBP / AUD weekly chart
On the daily chart, the GBP / AUD pair has been trading in the range from 1.7416 to 1.8475 since June 1, 2020. In this range, the pair broke through the symmetrical triangle around 1.8225 and continued to rally, exiting the range on June 8. The rally stopped at the horizontal resistance around 1.8990, which is the first resistance level. Above this level is the previously mentioned 50% retracement level, followed by the horizontal resistance around 1.9300. Note that the daily RSI is in the overbought and falling area. This could lead to a pullback as the RSI moves into neutral territory. The horizontal support below is at the top of the previous range at 1.8475 and the July 6 low near 1.8255. Below, support is at the top of the symmetrical triangle downtrend line around 1.8100.
GBP / AUD daily chart
As with most currency pairs this week, there is a possibility of volatility in the GBP / AUD currency pair due to the spread of the delta variant of the coronavirus. Add a possibly more convenient RBA and BOE perhaps more aggressive and the GBP / AUD pair can have more volatility in the forex market than some other currency pairs!
Joe Perry, Forex.com “ Official site
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