GBP/AUD's chart is looking bullish after breaking above a trendline reflecting investors lessening hunger for commodity currencies.
GBP/AUD is forecast to move higher after breaking above a key trendline on the weekly chart.
The MACD indicator (circled in orange) is also showing a bottoming pattern which further supports the suggestion of further upside for price action itself.
The pair will probably move up to a target at 1.72 eventually, calculated by extrapolating the height of the move prior to the trendline break (x) above the trendline.
The only bearish indication on the chart is the expectation that the 50-day moving average will cross over the 200-day soon, however, this would not qualify as a ‘death cross’ which is a very bearish configuration, as the 200-day is likely to still be rising at the point of the cross when it should be falling to properly qualify.
The fundamental outlook is negative due to lessening carry trade flows.
The carry trade is a strategy in which investors borrow a currency with a low borrowing rate and invest the money in a currency with high interest rate, thus essentially profiting from the difference.
But improving interest rate expectations in the UK have reduced the advantage of investors borrowing pounds to buy Australian dollars.
This has reduced carry flows to the Aussie, and although the outlook for Australian interest rates remains positive, the UK is catching up.