GBPAUD double bottom signals potential bullish continuation
The Australian dollar has been hit hard overnight, as markets react to a double whammy of a RBA rate hike and reemerging Chinese concerns. The real estate and credit crisis in China has been front and centre of the collective market mind of late, although yesterday afforded some relief to that theme as homebuilder Country Garden averted default thanks to a debt term extension. However, this morning's Caixin services PMI decline brought the pessimistic theme back into play, with the Australian dollar being hurt is response. Meanwhile, the RBA monetary policy decision appeared to reaffirm the stability theme, with rates held at 4.10% for the third consecutive meeting.
From the UK perspective, the final revision to the August services PMI showed an improved picture thanks to a surprise uptick from 48.7 to 49.5. That does confirm the first contraction since January, raising the likeliness of an impending period of economic difficulty. However, todays revision does ease fears of a sharp contraction for now, thus quelling recent calls for the Bank of England to halt their tightening process. Economic data out of the UK will be closely followed to gauge whether the pressure is going to build on the BoE to end their rate hike pathway, with the construction PMI, and the Halifax HPI releases in view.
Looking at GBPAUD, this current rise has completed a double bottom formation, signalling the end of the recent pullback. With a wider bullish trend in play, it is likely that we could see another upside move from here. A break back below the double bottom low of 0.94677 would negate this outlook, with a rise up to the previous high looking likely if the bullish trend is to persist.
From the UK perspective, the final revision to the August services PMI showed an improved picture thanks to a surprise uptick from 48.7 to 49.5. That does confirm the first contraction since January, raising the likeliness of an impending period of economic difficulty. However, todays revision does ease fears of a sharp contraction for now, thus quelling recent calls for the Bank of England to halt their tightening process. Economic data out of the UK will be closely followed to gauge whether the pressure is going to build on the BoE to end their rate hike pathway, with the construction PMI, and the Halifax HPI releases in view.
Looking at GBPAUD, this current rise has completed a double bottom formation, signalling the end of the recent pullback. With a wider bullish trend in play, it is likely that we could see another upside move from here. A break back below the double bottom low of 0.94677 would negate this outlook, with a rise up to the previous high looking likely if the bullish trend is to persist.