Pound turns weak on decline in manufacturing PMI

British MoneyA rally in the Pound against Greenback and other rivals currencies was ensured after relative undervaluation in relationships with global bond yield differentials, 1-year high growth in GDP of 2.3% in 3rd quarter of the fiscal year 2016 and 11-year low employment rate.

It is surprising to note that Pound was able to gain again Australian dollar which is a seemingly invincible currency. There has been a gain of 1000 pips in the currency pair of GBP/AUD since November 10th this year and it registered a high figure of 1.7153. However, there are several reasons that clearly show that Pound would not be able to match up with the rival currencies until Christmas.

With talks related to Brexit now beginning to intensify, the ING analysts are of the opinion that there would be a decline in the value of Pounds. It is interesting to note that a large number of market participants believe that the recent rally in Pound is because of a direct result of the unwinding of large short positions. This view is also confirmed by the Societe Generale’s analysts. In a survey conducted by IHS Markit, it is said that the manufacturing sector in the United Kingdom is feeling the heat at the moment for weak exchange rates. The reading of Purchase Managers Index (PMI) declined from 54.2 to 53.4 as on November 2016. A reading of 54.4 was expected by the analysts.

S&P Global Platts

The Bureau of Statistics in Australia reported an increase of 0.5% in the seasonally adjusted retail sales turnover in the month of October. There was an increase of 0.6% in the seasonally adjusted retail sales turnover last month. There was a growth of 0.3% in the retail sales against the expectations of the analysts.

The Australian budget revenue will be credited with several billions of dollars after the sharp rise in the price of iron ore and coking coal. The price of commodities is expected to remain bullish for many months to come after the restocking of the raw materials by the manufacturers in China. This, in turn, will benefit the Australian dollar to a great extent. Based on the arguments mentioned above, it is quite clear that the currency pair GBP/AUD will remain bearish in the coming few weeks.

According to the price chart, the currency pair is facing a resistance at 1.7100 levels. The support for the GBP/AUD exists at 1.6780. The MACD indicator is nearing negative figure. This clearly indicates that the currency pair is losing the momentum and in the coming times, the correction will continue.

The best way to earn profit from the movement of the asset pair would be from the short position in the currency pair nearing 1.7050 levels. One can place stop order above 1.7150 to avoid any kind of losses. The short position profit can be taken near 1.6800.

GBP AUD Pair Dec 5th 2016

GBP/AUD Pair: December 5th 2016

You can expect a return up to 70% on the investment within one week if you invest in a low or below option (equivalent to put) offered by your choice of Forex brokers. You should make the investment when the currency pair trades near 1.7050. Also, make sure that the trade is having an expiry for at least one week.


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