"Interesting combination: GBP/AUD breaking up maybe above 200ma after long trend down, and AUD/gold still well above 200ma. Could have more to come in both perhaps?"

Eoin Treacy's view Thank you for these interesting observations. The Australian Dollar doubled against the Pound over the last decade. I left Melbourne in the spring of 2000 and my Australian Dollars didn't last long when I arrived in London hunting for my first job. On my trip to Australia earlier this year, I couldn't help but notice how expensive everything seemed compared to my first visit. Currency trading is all about matching the strongest with the weakest currencies and the GBP/AUD rate has been an excellent example.

The Australian Dollar slumped during the worst of the 2008 credit crisis but subsequently became one of the strongest currencies backed by its impressive commodity export sector. If the Australian Dollar is often referred to as a commodity currency then it would be equally valid to refer to the Pound as a financial currency. The continued weakness of the banking sector has been a headwind for the Pound and it trended consistently lower for much of the last few years against the Australian Dollar.

It lost momentum from early this year in the region of A$1.50 and the early August rally checked the decline further. The Pound posted a higher reaction low in early September and retested the early August peak yesterday. It is somewhat overbought in the short-term and there is scope for a consolidation of recent powerful gains. Base formation development is the most likely prognosis and the benefit of the doubt can probably be given to a relatively gradually recovery provided it holds above the $1.50 area.

Gold in Australian Dollars ranged with an upward bias between 2009 and early August with it broke upwards. It continues to hold above A$1600 in a partial unwinding of the overbought condition relative to the 200-day MA. The medium-term upside can continue to be given the benefit of the doubt provided it continues to hold above the A$1400 area, which marks the five-year progression of higher major reaction lows.