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GBP/AUD Nears YTD High, Would Confirm Bullish Break

AUD
  • The post-RBA pullback in the AUD persists through to NY hours, with AUD holding its position as the poorest performer across G10 so far Tuesday. Despite GBP/USD's pullback off the overnight high, GBP/AUD remains particularly firm and is approaching horizontal resistance at 1.8030 - the Feb28 and YTD high.
  • Any break north of this level will open levels last seen in late December, with 1.8276 the longer-term upside target.
  • Short-end yield spreads remain a key underlying driver, with the 2yr UK-AU yield spread pressing higher in recent sessions and helping aide the strength in the cross since the RBA overnight.
  • On a technical basis, momentum in the cross is yet to reach overbought levels, with the 14-day RSI still below the 70 handle. The last time the cross was technically overbought was October last year, which presaged a near 3% pullback in the pair.
Figure 1: GBP/AUD vs. UK-AU 2y Yield Spread

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