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GBPAUD Analysis (June, 2022) Further Monetary Action!?

Over the past few months the United Kingdom has seen a period of stagflation.

The monetary authority and Government are struggling to keep up with rising inflation, interest rates have already been increased and there's even talks of raising them again at a faster rate to combat inflation.

Rising interest rates will be a contractionary measure to curb spending, make lending more expensive so that people use less credit as they have less disposable income.

Logikfx Technology Summary

The Logikfx technology summary page is our aggregated view of all the major economic indicators used as part of the fundamental analysis.

What the technology summary includes is the following:

  • Macro currency strength meters

  • GDP differentials

  • Interest rate differentials

  • Hedge fund positions

Majority of the fundamental indicators are all starting to signal an bullish move other than the GDP differentials.

Macro Currency Strength Meter

The Macro Currency Strength Meter is our main fundamental indicator which helps us gauge the potential fundamental direction of an economy. What we've identified over the past few weeks is that the GBP saw its fundamental direction fall but over the past 2 weeks it's actually started to rise in value, suggesting a potential rise in GBP fundamental direction.

AUD on the other hand saw their economic data see bearish releases suggesting a weakness in Australian economy.

GDP Differentials

The GDP differentials are one of our contradictory indicators for GBPAUD. What the indicate and the IMF have suggested is that the UK is set to grow at a much slower rate than Australia moving into 2023...

This could mean that GBPAUD in the long-term is set to fall in value but the other economic indicators are suggesting a bullish move.

This is one to keep an eye on as it may conflict with the bullish idea.

Trade Analysis

BRENT oil is another commodity we're analysing against GBPAUD.

What we've seen on BRENT oil is that energy prices have been rising over the past couple months and it's now reaching new highs, suggesting higher inflation across the UK.

What we want to keep an eye out here is if resistance is held and sellers start to sell BRENT at a higher price or do buyers take control and breach.

Currently, the BRENT prices go against the bullish idea as there's a negative correlation between BRENT and GBPAUD...

BP, British Petroleum is a company we've included within the analysis as one of UK's largest petroleum companies.

Similar to the price of BRENT we've seen the share prices of BP rise.

This makes sense as the price of BRENT means BP can charge higher prices and receive more profit on any reserves they may have drilled at lower prices.

Again, this goes against our GBPAUD fundamental direction so we need to be cautious moving forwards as the trade analysis would be disagreeing overall with the direction.

Gold is our final commodity included in the trade analysis, as one of the worlds safest assets, many bars are actually stored and held in London UK.

What we've found out is a inverse relationship between gold and GBPAUD, especially since Australia exports a decent chunk of gold...

Gold prices have started falling suggesting a GBPAUD upside move.

Overall, 2 out of 3 of the trade analysis factors are saying it's bearish whereas Gold is saying bullish.

Interest Rate Differentials

The interest rate differentials have started to show a rising differential, this suggests that over the long-term GBPAUD is potentially in for a bullish move.

As you can see over the past 10 years, the differential price has been rising and throughout that period GBPAUD has been appreciating...

Hedge Fund Positions

The hedge fund positions show the overall market sentiment which we use to make sure we're trading with the market money and not against it...

In this case we can confirm that the Hedge funds are buying the GBP and selling AUD..

This confirms our fundamental direction that Hedge funds are also buying GBPAUD.

Price Analysis

The price chart for GBPAUD is starting to reach interesting levels of support which have already seen buyers come in...

It will be crucial in this area to identify any buying signals on a technical level to confirm the fundamental direciton.

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