Overview
The Australian Dollar will face two high volatility events; the first one corresponds to the interest rate decision, for which the analysts’ consensus foresees a rate cut to 0.1% from the current 0.25%. The second one corresponds to September’s Retail Sales figures, where the consensus expects a recovery. Nevertheless, the price action suggests a new decline before reversing.
Market Sentiment
From a fundamental perspective, the Australian Dollar will have two high volatility events that will drive the next week’s oceanic currency movements.
The first event corresponds to the Interest Rate Decision, which will occur on Monday the 2nd during the overnight session. The analysts’ consensus foresees a reduction from the current rate of 0.25% to 0.10%.
The last interest rate cut by the Reserve Bank of Australia’s broad members occurred in March 2020, where policymakers decided to cut the reference rate from 0.5% to 0.25%.
The second high impact will occur in the overnight trading session of Tuesday 03rd, where the Australian Bureau of Statistics will release the Retail Sales (MoM) data corresponding to September. The analysts’ consensus foresees a decline to 1.5%.
Although the analysts’ polled foresee a contraction for September, they expect an improvement in the retail sector after falling 4% in August.
On the market sentiment side, the GBPAUD cross in its daily chart exposes the 90-day high and low range, which reveals the short-term participants’ sentiment.
The previous chart illustrates the price action moving in an upward sequence that began on September 11th that pushed the cross from the extreme bearish sentiment zone toward the extreme bullish sentiment zone.
In fact, the 60-day moving average movement below the price confirms the bullish bias that carries the cross. The next supports locates at 1.82688, which corresponds to the extreme bullish sentiment zone support, and 1.81227 corresponds to the 60-day moving average that acts as a dynamic support.
In summary, considering the pessimistic forecasts by the Australian data analysts and the extreme bullish sentiment unveiled in the GBPAUD cross, there exist the possibility of further weakness in the oceanic currency.
Technical Analysis Outlook
The big picture of the GBPAUD cross under the Dow Theory exposed in its 2-week log-scale chart reveals the price is moving mostly sideways since early March 2013, when the price touched its bottom of 1.43811. Once the cross found buyers, the price raised until 2.23722 reached in mid-August 2015.
Once the March 2015 high was reached, the pair started to correct the Primary trend finding support at 1.57896 in late October 2016. This correction accomplishes the Dow Theory rule that says that the Secondary trend retraces between 33% to 66% of the Primary trend.
The same situation occurs with the ascending sequence that advances from 1.57896 toward 2.08522 reached in mid-March 2020, which retraces beyond 66% of the previous decline.
Likewise, the GBPAUD cross started to develop a downward sequence, which found a bottom at 66% of the previous rally. Nevertheless, considering the price and time relationship between the last decline and the previous two movements, we conclude that this decline corresponds to the Minor trend of the Secondary upward trend, which looks incomplete.
The GBPAUD outlook under the Elliott Wave Theory exposes the progress in a downward five-wave sequence, which advances in its incomplete wave 4 of Minor degree labeled in green. This corrective structural series currently moves in its wave ((a)) of Minute degree identified in black.
Considering the elliott Wave theory, the current wave in progress should develop three internal segments and advance until the zone between 1.86783 to 1.90442, where the cross could find resistance and start its wave ((b)) in black.
Likewise, considering that the third wave of Minor degree is the extended wave, the fifth wave should fail to reach a lower low than the end of the third wave of Minor degree located at 1.74935. Finally, the invalidation level of the bearish scenario is located above 1.95100.
