GBP/AUD edged north on Wednesday, breaking above the crossroads of the 1.8100 level and the downside resistance line drawn from the peak of the 18th of September. Combined with the fact that the rate continues to trade above the upside support line taken from the low of the 9th of August, this suggests that the short-term outlook of the pair has turned back positive.
We believe that the break above the aforementioned downside line may have opened the path for the 1.8225 resistance zone, but a clear break above that hurdle is the move that will make us more confident on larger upside extensions. Such a break may set the stage for extensions towards the 1.8400 zone, defined by the peak of the 18th of September, the break of which may encourage the bulls to put the psychological hurdle of 1.8500 on their radar.
Looking at our short-term oscillators, we see that the RSI emerged above its 50 line and is now pointing up, while the MACD, already above its trigger line, has just poked its nose above zero. These indicators detect upside momentum and support the case for GBP/AUD to continue drifting north for a while more.
On the downside, we would like to see a clear dip below 1.7920, a support marked by the low of the 23rd of September, before we start examining whether the near-term outlook has turned negative. Such a dip could confirm the break of the upside support line taken from the low of the 9th of August and is possible to initially aim for our next support zone of 1.7820. Another dip below that level could prompt the bears to drive the battle lower, towards the 1.7700 territory, fractionally above the inside swing peaks of the 23rd and 24th of August.
