The GBP/AUD currency pair isn’t one of the popular crosses on the board. It doesn’t appear by default on forex charts on major sites. This forex trading option looks currently very lucrative.
Both fundamental analysis for this currency pair and technical analysis support going short, on what looks like a serious move.
GBP/AUD Technical Analysis
The GBP/AUD is now trading at 2.0855 (according to NetDania). During the last trading days of 2008, it touched a record low 2.0039. This is a level that this pair didn’t reach in a decade. GBP/AUD was under 2 way back in 1998.
Now, this level of 2.02 is a strong resistance line that this pair already encountered between May and August 2008. For about 3 months this year, the GBP/AUD tried to break this resistance line and was close to it – but it didn’t break it. It eventually went up, very high, up to 2.7056
Now, after the global crisis became much worse, the GBP/AUD fell sharply back to around 2.02 and even briefly broke this line. We are currently at the New Years holiday, whee trading volume is very low. After Forex trading will resume, this currency pair could continue the free fall.
GBP/AUD Fundamental Analysis
The state of the British economy is very bad, while the Australian economy is doing relatively well. Due to the structure of each economy, these trends are bound to continue.
Bad British Economy
“Centre for Economics and Business Research (CEBR) predicts that the UK economy could shrink by as much as 2.9 per cent next year as bank lending continues to stagnate” – says the Daily Mail in the UK. A retraction of 3% is devastating.
Almost all the economic news from the UK in the past months have disappointed expectations. It has almost become too easy to trade the pound – each time that a significant economic figure is published – the pound is expected to dive.
The interest rate in the UK has dropped to 2% and it is expected to drop even lower than that. The BOE voted uninamously in the last vote.
House sales and house prices have plunged in the UK. This could be seen in the Halifax HPI which drops constantly and shows another part of the economy’s retraction.
More bad figures could be seen in the Manufacturing Production, Claimant Count Change, and the recent CBI Realized Sales.
The pound has weakened to record lows against the US dollar, a currency that was beaten by most other currencies.
So, the British economy is in a bad state, and predictions for 2009 look even worse. GBP is going down.
Healthy Australian Economy
Although the Australian economy has also been hurt by the global crisis. It still isn’t in recession. In the third quarter, there was still some growth down under. This is different than most of the world.
Interest rates have gone down in Australia, but it’s still quite high 4.25%, and the pace of interest rate cuts is very moderate. In Britain, and elsewhere, cuts have been sharp. Also the unemployment rate there can still be envied by all the world – 4.4%. The last figure came better than expected.
The remote location of Australia, and the various resources it has, mean that it will be hurt much less by the global crisis, and that AUD is stronger than other currencies.
So, after inspecting the major factor of each economy, and the technical analysis of the GBP/AUD chart, there is one conclusion:
GBP/AUD Short – with a very deep target price.
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