Sterling Squares With Aussie After Manufacturing Data Rises 6% in December

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The Pound recovered versus the Australian Dollar on Tuesday, after data for the UK Manufacturing sector hit a two and a half year high.

Manufacturing PMI rose to a peak of 56.1 in December, well above the 53.3 forecast and the 53.6 set in November.

The weak Pound was probably behind the boost as it has increased the competitiveness of UK exporters.

The Pound rose across the board but went from 1.6980 to 1.7058 in the GBP/AUD pair.

Chinese Data Boosts Australian Dollar

Earlier on Tuesday, the Aussie had been outperforming the Pound due to the release of positive Chinese Private Manufacturing Data.

China Caixen Manufacturing PMI in December rose to 51.9 from 50.9 in November and was well above forecasts.
42% of Australian exports are bound for China, making it Australia’s largest trading partner by far, so the lift in manufacturing data was positive.

The accompanying report showed that the boost mainly came from rising domestic demand, not export demand which flatlined.

Whilst domestic demand could taper if fears of a credit crunch in the overleveraged Chinese economy come true, it was still positive for the Aussie as China imports and uses much of Australia’s raw materials in its economy.

Technical Outlook for GBP/AUD

The pair has now broken above the key 1.7178 highs which had been providing a ‘ceiling’ to a multi-day sideways range.

The break reconfirms an expected continuation up to a probable target at 1.7275, at the R1 monthly pivot, a level traders watch as it often acts as an obstacle to further price movement.

The MACD, a momentum indicator, is flatlining and could be about to fall, signaling weakness in the underlying asset, however, it is too early to say for sure.

The pair has already reached 1.7215, but it will probably push slightly higher, nevertheless there is a risk the target may have been reached to all intents and purposes, particularly given the possibility of a trendline (see chart below) providing resistance at the highs.

A break above 1.7200 would confirm the pivot breached and signal more upside to the next target at 1.7300.
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