GBP AUD

A brutal day for the Aussie as fresh trade tariffs and recession worries collide. With EUR/AUD breaking out and GBP/AUD near pandemic highs, U.S. nonfarm payrolls looms large for risk sentiment.

Last week I outlined a neat-term bullish bias for to head towards the 2020 high. With that objective achieved and momentum turning lower, I'm now focussed on the higher-timeframes potential for some mean reversion lower.

Risk aversion and technical setups are driving bullish momentum in GBP/AUD and EUR/AUD, but mixed signals demand confirmation before chasing moves.

AUD/USD has made a mild attempt to move higher this week, yet higher timeframes continue to suggest a move towards 62c. And that could see GBP/AUD have a crack at the 2020 highs over the near term, though I'm also keeping an eye out for a cycle top and pullback.

Amid global volatility, key levels on these Aussie crosses continued to be respected. We look at potential setups as we enter the new trading week.

There’s a lot of excitement in Chinese markets about the latest stimulus measures to address flagging economic growth. Given it’s often used as a proxy for those traders looking to play China without directly investing in China, this type of environment should benefit cyclical currencies such as the Australian dollar.

GBP/AUD is rarely as overbought as it is right now. And when it has been this overbought in the recent past, it’s usually coincided with a near-term top.

Considering the rally in cyclical assets following the soft US inflation report, the steep reversal in AUD/USD comes across as a little strange. As long as economic growth holds up, the prospect of Fed rate cuts should provide tailwinds for cyclicals. Therefore, the reversal has created a short setup. But not against the US dollar.

Attempts to ram EUR/AUD and GBP/AUD into higher trading ranges failed last week, suggesting the Aussie dollar may be starting to rediscover its mojo against some major European crosses.

S&P global release their flash PMI reports for the major regions today. And with PMI reports from Europe and US, it places EUR/USD onto trader's radars.

With plenty of major data and central bank speeches scheduled in the UK and Australia this week, the next few days may prove to be critical for the medium-term trajectory for GBP/AUD heading into 2024.