GBP/AUD Buy Opportunity breaking above 1.8600
All the major currencies have been weak against the USD for a couple of weeks. However, GBP and EUR are performing a bit better than other days.
Yesterday RBNZ increased the 0.25% cash rates from 0.50% to 0.75%. But cash rates didn't help NZD to attract investors because of inflation. So Instead of getting strong, NZD became weak against all the major currencies.
Most of the time, RBA and RBNZ balance their currency rates and handle economic situations in the same way. So, it is expected RBA may increase their bank rates very soon.
But as inflation also is rising in Australia, maybe AUD also won't be able to get the advantages of higher bank rates unless they increase more than 0.5% bank rates. I don't think RBA will take such risks.
During the pandemic, central banks took risks rising banks rates. Instead, they should reinvest in the economy. Higher bank rates uninspired investors to take a loan from the banks and reinvest in the economy.
Higher bank rates will reduce more spending. From my personal view, it's not a good sign for the long-term economy, especially in a pandemic situation, whether the economy needs more investment to start the business.
On the other hand, The UK's pound sterling is still heavily weighed down by the Bank of England, with MPC member Silvana Tenreiro noting that she would not want to say specifically if they make their first rate hike in December or February.
GBP/AUD Technical View
In the daily chart, GBP/AUD broke the descending trend and held above it. But from the present rates, 1.8600 is identified as a resistance.
Since September, GBP/AUD has been unable to break above the 1.3600 price zone. So, this area will work a strong resistance, no doubt.
As for GBP/AUD breaks, and is stable above the descending trend line. So, if we see that the GBP/AUD can break 1.3600, we should buy GBP/AUD.
To the upside, our first target will be 1.8761 and the final target to the upside 1.9840/1.8950 price zone.
As long as the market is above 1.8400, it won't trend its uptrend. So, the stop-out level should be below the 1.8400 price zone.
