GBPAUD is moving inside an ascending channel connecting its highs and lows since mid-April.

Price just bounced off the resistance and could be due for a test of support at the 1.7400 major psychological level.

Using the Fib retracement tool on the latest swing low and high shows that this support area lines up with the 38.2% level while the 50% level coincides with the channel support. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the uptrend is more likely to resume than to reverse.

Stochastic is pulling up from the overbought zone to indicate that buyers are regaining control of price action. However, the gap between the moving averages is narrowing to suggest that bullish momentum is fading. A break below the lowest Fib around 1.7300 could be enough to indicate that a downtrend is about to take place.

The BOE statement turned out less hawkish than expected even as the central bank kept monetary policy unchanged. Policymakers warned that Brexit risks could weigh heavily on consumer spending and living conditions due to subdued wage growth and rising price levels.

Economic data also turned out weaker than expected, with manufacturing production down 0.6% and industrial production down 0.5%. There were no reports released from Australia then, allowing the Aussie to take advantage of the pickup in commodities. However, these gains could be returned as China reported a steep fall in iron ore prices again.

By Kate Curtis from Trader’s Way