GBP/AUD has come under renewed selling pressure after it created a fresh almost 5-month low, falling back below the 1.8375 resistance level, but remaining above the 20- and 40-simple moving averages (SMA) in the daily chart. Despite the latest pullback though, the pair has not posted a fresh lower low, which makes one hesitant to trust further sharp declines for now.
Looking at momentum oscillators in the short-term, however, they suggest further downside pressure may be on the cards. The RSI dropped below the threshold of 70, detecting negative momentum, and is also pointing downwards. The MACD, already negative, is ready for a bearish crossover with its trigger line.
In case of further declines in the index, immediate support may be found near the 23.6% Fibonacci retracement level of the up-leg from 1.6160 to 1.8507, near 1.7950. A downside break of that zone would open the way for the 40-day SMA near 1.7763 at the time of writing. If sellers manage to push below that hurdle too, the price could challenge the 38.2% Fibonacci of 1.7608, increasing the probability for further bearish extensions.
On the flip side, if the bulls retake control, price advances may stall initially near the latest highs at 1.8375. A potential upside violation of this level would send prices until the next resistance of 1.8807, taken from the highs on March 28.
To conclude, GBP/AUD has been in a neutral mode over the last eight months and a break above the 1.8507 level would endorse the scenario for a bullish extension. Otherwise, a dip below 1.7090 would tilt the risk to the downside.
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