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Fair winds are filling the Aussie dollar's sails.
The pound to Australian dollar exchange rate is under the hammer as it falls a further 0.40% in midweek trade to reach 1.9875.
A breakdown through the almighty support of 2.0 is effectively being confirmed.
This is a significant support zone that has long kept alive the dream of a return to higher planes.
With 2.0 evaporating, so too do the dreams of buyers wanting a return to the 2025 highs at 2.1.
This breakdown in GBP/AUD is mirrored, and potentially even driven by, the break higher in AUD/USD that is also underway: the pair breaks through resistance at 0.6737 to hit 0.6749. As AUD/USD moves, other AUD crosses respond.
Now, we pivot to looking at lower levels.
✳️ What we're seeing...
Momentum is to the downside with the RSI pointing downwards at 35.
We're comfortably below the 200-day exponential moving average now, which is our technical confirmation that we're in a medium-term downtrend.
First target from here is a horizontal graphical support at 1.9782, which stretches back to the November 2024-March 2025 period.
Then comes 1.96, which is 2025's low.
✳️ Fundamentally speaking...
Fair winds are filling the Aussie dollar's sails:
● A searing metals rally that boosts Australia's terms of trade.
● Geographical and political remoteness from the current source of global anxieties: the EU-U.S. confrontation over Greenland.
● The Reserve Bank of Australia will likely raise interest rates at some point in the coming months. This is in stark contrast to the Federal Reserve and Bank of England which are expected to lower rates.
● Rates divergence - which means Australia's interest rate yield is increasingly advantageous - is a powerful driver of FX and bodes for higher AUD/USD and lower GBP/AUD.
"AUD is now the highest yielding currency in G10... we recommend taking a long AUDCHF position over the full year of 2026," says RBC Capital Markets.