The Australian Dollar (AUD) continues to demonstrate resilience against major currencies, specifically focusing on GBP/AUD, supported by favourable domestic policies and global economic factors. The AUD's recent performance reflects a combination of the Reserve Bank of Australia’s (RBA) hawkish stance and weakening global counterparts, notably the US Dollar (USD) and British Pound (GBP).

Key Drivers for AUD:

1. RBA Outlook: The RBA has maintained a restrictive stance, keeping its cash rate at 4.35% to combat inflation. This position continues to bolster the AUD, making it an attractive currency for traders. The central bank's firm position contrasts with the dovish expectations surrounding other global central banks, such as the US Federal Reserve, further strengthening the AUD.

2. China's Economic Influence: Despite China's latest Caixin Manufacturing PMI indicating contraction at 49.3, down from August's 50.4, Beijing's recently announced stimulus measures are viewed favourably for cyclical assets such as the Australian Dollar. As Australia's largest trading partner, China's policy shifts heavily influence AUD performance, with traders optimistic that these measures will help support Australia's commodity-linked economy.

3. US Federal Reserve Uncertainty: Markets are now pricing in a possible rate cut by the US Federal Reserve as early as November. The weakening USD, particularly following lower-than-expected US Core PCE data, has further contributed to the AUD's upward momentum.

4. GBP Weakness: The British Pound has been under pressure due to mixed economic data and uncertainties surrounding the Bank of England's policy direction. As the AUD remains strong, the GBP/AUD pair is trading lower, with further downside expected if UK economic conditions do not improve.

Technical Analysis – GBP/AUD Outlook

The GBP/AUD pair is trending downward, having breached key support levels around 1.9349, a crucial mark that previously blocked significant bearish moves. Momentum indicators, such as Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), are generating bearish signals, reinforcing the likelihood of continued downside for the pair.

• Support Levels: A break below 1.9280 could target 1.9100 in the coming weeks if bearish sentiment prevails.
• Resistance Levels: Should the pair recover, it may retest the 1.9349 level. However, the upside remains limited due to weak UK fundamentals and strong AUD performance.

Strategic Outlook for Traders

• Bearish Bias on GBP/AUD: Given the RBA's hawkish stance and supportive global factors, AUD is expected to remain strong in the near term. Traders should consider short positions on GBP/AUD, particularly if the pair remains below 1.9349. Monitoring China's ongoing stimulus efforts and US Fed developments will be key.
• Risk Management: GBP volatility could spike with upcoming UK data releases, so ensure stop-loss placements are tight. Watch for any surprises from the Bank of England, which could shift the current trend.

In conclusion, while the AUD benefits from strong domestic policy and external tailwinds, the GBP continues to face headwinds, making GBP/AUD a favoured pair for AUD strength plays.

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