The GBPAUD was higher after Australian GDP came in worse than expected, confirming the first recession down under for 30 years. The market had been expecting a reading of -5.2%, but the actual number was -6.3%.
The latest release was the worst number since records began in 1959, but the country managed to escape a technical recession during the 2008-09 financial crisis. Australia’s economic recovery is being hampered by a strict two-month lockdown in the state of Victoria.
The number will keep some pressure on the Reserve Bank Governor Philip Lowe to increase stimulus measures in the country. Yesterday saw the bank holding rates at 0.25% as expected, but they did increase the timescale of the Term Funding scheme for banks to access low rate funding into June 2021.
Despite the gloomy outlook from Australia, the U.K. is not in vastly greater shape and its own GDP was worse. The U.K. is also about to enter the flu season, while Australia moves to summer months, so the risk for higher virus cases will definitely be in Britain and this could bring a bearish tone to the GBPAUD pair going forward.
GBPAUD Technical Outlook
The GBPAUD rallied on the GDP release but I still see this pair going lower. The pair broke lower from an ascending triangle and is now testing support levels, but the July rally leaves little support down to the low at 1.7700. This gives us a good risk/reward trade on the short side. The resistance around 1.8200 should cap the rally and create a good sell signal. If you want to learn more about technical analysis or risk management then please consider the Investing Cube Trading Course or Trading Coaching.
GBPAUD Daily Chart