The GBPAUD currency pair has been riding a strong upward wave, but a recent dip in the British Pound promises a surge of excitement in the currency pair’s price dynamics. On Tuesday, the UK revealed a dip in wage growth from 7.2% to 6.5%, falling below the anticipated 6.8% consensus. This shift intensified speculations that the Bank of England might have concluded its hiking cycle, paving the way for potential aggressive rate cuts in the coming year.
Meanwhile, the Australian Dollar hasn’t been without its challenges, grappling with its own weaknesses as lacklustre data suggests that interest rates might have peaked. The looming possibility of the Reserve Bank of Australia moving toward rate cuts adds another layer of complexity. With both currencies vying for dominance in this tussle of decline, the stage is set for a captivating showdown – which one will emerge triumphant?
Technical
On the 4H chart, a rising wedge pattern is in play, with the price pulling back in the supply zone close to the dynamic resistance of the wedge. Volumes are declining, suggesting that the uptrend may be running out of steam, leaving the potential for a wedge breakdown as we advance.
Resistance-turned support at 1.9118 acts as the last line of defence to keep the wedge in play. If the price breaks down this level, it could converge with the 25-SMA (green line) near the support at 1.9057. This level could act as a pivot to retest the breakdown, but an additional leg down could see the pair reaching the 50-SMA (blue line) at the prior 61.8% Fibonacci golden ratio of 1.9009.
Conversely, the pattern could remain in play if the currency pair remains above 1.9118. The supply zone at 1.9184 offers resistance, which, if cleared, could send the currency pair on its way to test higher resistance at the 1.9228 mark.
Summary
The latest UK labour data has enforced a pullback in the GBPAUD currency pair, leaving the rising wedge pattern vulnerable to a breakdown. Support at 1.9118 could be a crucial level to watch in the coming sessions to determine whether the technical pattern will play out.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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