AUD/GBP is Ready For a Breakout Ahead of UK Retail Sales Data
The AUD/GBP price has been in a consolidation phase in the past three months as the market focus on the recent actions by the RBA and BoE. The pair has remained between the important resistance point at 0.5781 and support at 0.5602. It is trading at 0.5753, about 11% above the lowest level since January 26th of this year.
Australia and UK inflation
The UK and Australian economies are facing significant challenges as inflation continues rising. Data published on Wednesday showed that UK inflation jumped to a multi-decade high of 9.4% in June. Core inflation eased slightly to 5.3%.
These numbers show that the Bank of England’s policy to contain price increases is not working because of factors outside its control. For example, the bank has no control over the ongoing crisis in Ukraine and the logistical challenges that companies are facing.
Australia is also struggling with high inflation. The most recent data showed that the country’s inflation rose by 5.1% in the first quarter. This increase triggered the RBA to start hiking rates in May. Since then, it has increased rates by 135 basis points. In a statement on Wednesday, RBA’s Philip Lowe said that the bank would continue hiking rates later this year.
The next key catalyst for the AUD/GBP price will be the upcoming UK retail sales numbers scheduled for Friday. Analysts expect that sales declined by 5.3% in June as inflation surged. Core retail sales are expected to have dropped by 6.3% in June. The pair will also react to the flash manufacturing and services PMI data.
Turning to the daily chart, we see that the AUD/GBP pair has been in a strong bullish trend in the past few days. It has managed to rally from a low of 0.5620 to the current 0.5751. This price is slightly below the upper side of the rectangle at 0.5781. However, it has moved slightly above the 25-day and 50-day moving averages, while the Relative Strength Index (RSI) has been rising.
Therefore, the pair will likely keep rising as bulls attempt to move above the resistance at 0.5781. If this happens, the pair will rise to the YTD high of 0.5820. A drop below the support at 0.5715 will invalidate the bullish view.