GBPAUD formed lower highs and found support at the 2.1425 level, creating a descending triangle pattern on its 4-hour forex chart. 

Price is currently testing the triangle support, with a potential breakdown likely to indicate the start of a downtrend for the pair.

The chart pattern is around 700 pips in height so a resulting downtrend could be of the same size. The 100 SMA looks ready to make a crossover below the longer-term 200 SMA, adding confirmation that a breakout is possible.

However, both RSI and stochastic are on the move up, indicating that another bounce back to the triangle resistance might take place. If this continues to keep gains in check, price could retest the triangle support. 

Earlier this week, data from China came in mostly in line with expectations, allowing the Aussie to bounce on a relief rally. The pound has been on weak footing, despite the lack of data from the UK, as traders are probably reacting to weaker expectations of a rate hike from the BOE.

UK manufacturing PMI came in line with expectations, dipping from 51.6 to 51.5 in September. The construction PMI is up for release today and a climb from 57.3 to 57.5 is eyed, reflecting a faster pace of expansion for the industry. However, traders might hold out for the release of the services PMI next week since this sector makes a larger contribution to overall economic activity. 

Earlier today, Australia reported a 0.4% increase in retail sales as expected, enough to recover from the previous 0.1% decline. No other major reports are lined up from Australia for the rest of the week, although gold and commodity prices might still push the currency around. The upcoming NFP release from the US might have a strong impact on overall market sentiment, potentially leading to strong moves among higher-yielding currencies like the Aussie.

By Kate Curtis from Trader’s Way