- GBP/AUD stuck in tight range

- Could signal the 2020 decline is over

- 1.8734 a potential upside target

- AUD stalls in sympathy with commodity and equity prices

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The British Pound continues to solidify its base against the Australian Dollar, meaning the sharp decline witnessed since early April has stalled which paves the way for a potential rebound over coming days and weeks.

The Pound-Australian Dollar exchange rate is seen at 1.7980 at the start of the new week, ensuring it is unmoved since last Wednesday in what is quite a remarkable consolidation phase that leaves traders pondering what it all means for the outlook.

The first initial observation we would make is that because GBP/AUD has been confined to a broader sideways range since June 18 the downtrend that characterised April-June has lost its bite.

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We therefore no longer default to the view that any pullbacks in Sterling are merely chances for sellers to reload, instead the building base suggests that the bears have lost the initiative and the potential for a recovery has therefore grown.

Indeed, technical analysis providers Trading Central say their studies advocate for a recovery in Sterling with resistance points 1.8942 and 1.8734 being cited as likely targets for a recovery.

Of course, that recovery has not yet shaped up and the market is in something of a waiting period, but Trading Central say as long as the market remains above a pivot point at 1.7740 a recovery should ultimately transpire.

However, a break below that pivot at 1.7740 would be seen as a sign that the multi-month downtrend is reasserting and a fall to 1.7740 and then 1.7392 becomes possible.

So these are the levels to keep aware of for those readers watching GBP/AUD.

While technicals are somewhat bullish GBP/AUD, fundamentals certainly do not favour Sterling at present.

As we note in our main morning piece there are a suite of factors working against the Pound, including subdued equity markets, Brexit trade negotiations and fears the Bank of England will soon boost quantitative easing again in response to the economy's sluggish recovery from the covid-19 lockdowns.

We are yet to see any developments that would suggest the dial is about to shift in favour of the Pound but we would remind readers that this week sees Brexit negotiations take place in London and any upbeat feedback on progress could trigger GBP/AUD higher.

Talks are deadlocked according to officials and with October being touted as a deadline we still believe it is too soon for either sides to signal progress as they will want to be seen negotiating to the bitter end.

We would also keep an eye on the PMI data and retail sales data due out on Friday, again positive surprises here could prompt a rebound in Sterling as it would suggest the economy is finally starting to build some recovery momentum following the major easing of lockdown restrictions in early July.

The Australian Dollar meanwhile remains focused on global developments, namely the performance of stock markets and commodity prices.

On this front the rally in copper prices appears to have stalled since topping out last Monday, with copper being a bellwether for the broader commodity space we wonder whether this has had a role to play in the Aussie Dollar's lacklustre performance over the recent past.

Also keep an eye on the S&P 500, the index that is taken to be the best insight into global investor sentiment. We note this leading U.S. stock market index has hit a rock-hard level of resistance located around 3238 and because there has been little upside traction for over a week now we would be prone to drawing comparisons to the Aussie's performance over this period.

Our feeling is that markets are ultimately going to break out of this sideways move towards the topside, which would boost the Australian Dollar and likely reassert GBP/AUD exchange rate downside.

"AUD/USD will remain heavily influenced by offshore developments this week. AUD/USD can spend some more time above its recent 0.68‑0.70 trading range. Positive results from the AstraZeneca and Oxford University vaccine trial (expected to be published today) would spur the global economy and support AUD, NZD and CAD," says Joseph Capurso, Head of International Economics at Commonwealth Bank of Australia.