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The pound is looking to record a fourth consecutive daily gain against the Australian dollar, a sign that downside momentum has been arrested.
GBP/AUD rises to top of the March consolidation zone at 1.9113; the past four trading sessions have seen the pair rally from 1.88, which is the floor of that zone.
The chart will show a setup that hints that the almost relentless selloff of January and February has run out of steam and momentum is shifting away from the Aussie dollar:
GBP/AUD consolidation is underway, with immediate advantage going to sterling.
From here, a tentative recovery starts to take shape where we would anticipate a retracement of some of the losses endured over the past two months. To be sure, we would want to see at least a daily close above 1.9113 before that becomes a base case.
If this does happen, then a rally to the 50-day moving average at 1.9313 is in prospect.
A potential explanation for the GBP/AUD setup turning more constructive is the RBA's interest rate cut last week.
That cut was expected, and the prospect of further cuts was kept alive. But, crucially, it's hard to see RBA rate hike expectations lifting much further from here.
That means the AUD's interest rate advantage might have peaked.
At the same time, odds of rate hikes at the Bank of England have risen, with last week's policy decision keeping expectations alive that the next move could indeed be a rate rise.
For GBP/AUD, these central bank developments are supportive.
We do caution, however, that Britain's public finances are in a less healthy state than those of Australia. As a result, there's a risk of a 'buyers strike' of UK bonds - the instruments the government issues in order to borrow money.
If that happens, then the pound can come under notable pressure and fall sharply against all its G10 peers.
We've seen some hints that those concerns are building, but as of yet there's no panic.