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GBPAUD Might Retrace Before Heading Lower Again

The British pound traded lower against the Australian dollar earlier during this week. However, it looks like the pair is stabilizing now and might correct higher from the current levels. The UK Gross Domestic Product was released by the National Statistics earlier during the London session, which came in line with the expectation. The report published mentions that the UK GDP increased by 0.8% in Q2 2014, the second consecutive quarter on quarter increase of 0.8%. The British pound was seen trading a touch higher after the data release.

There was a major bullish trend line for the GBPAUD pair on the 4 hour chart, which was breached earlier during this week. The pair fell sharply after the break, and traded close to the 1.8010 support level.

Please check the chart attached for the post image

 

Currently, the pair is flirting with the 61.8% fib retracement level of the last major move higher from the 1.7822 low to 1.8373 high. It is very likely that the pair might bounce from the current levels, and trades closer to the broken trend line. If that happens, then sellers might appear around the 1.8140 level. The most important thing to note here is that the 200 moving average on the 4 hour chart also sits around the mentioned level.

Alternatively, if the pair fails to trade higher and close below the 61.8% fib level, then it might call for a test of the previous low. The RSI is bouncing from the extreme levels, and that is the reason why the chance of a short-term correction is more compared to a break lower.

Overall, as long as the pair is trading above the 1.8020 level, then it might correct and trade closer to the 200 moving average (4H).

Posted By Simon Ji of IKOFX