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- GBP/AUD is in short-term downtrend which could continue

- Except 50-week moving average is providing support just underneath

- Main release for the Pound is GDP data for Q2 - for the Aussie the RBA meeting

One Pound buys 1.7571 Australian Dollars on the interbank market at the time of writing, which represents a sizeable decline from the 1.7710 of a week ago.

After going in no particular direction for some time now the Pound-to-Australian Dollar does appear to have finally established a short-term downtrend, of sorts, as illustrated on the chart of the 4-hour timeframe, which shows the exchange rate gently declining.

The daily chart is also looking more bearish after the recent break below the 50 and 200-day moving averages (MAs) (circled). This would normally be a green light for sellers to enter the market at start 'killing it'.

The problem, however, is that on the weekly chart the pair is nearing the 50-week Moving Average (MA) at 1.7533 which is likely to present a formidable obstacle to more downside and could even mark the bottom of market at the current time.

Large MAs are often the site of major reversals in the trend. At the very least they usually result in the downtrend pausing or rebounding. We thus expect some sort of slowing down in the bearish trend as the exchange rate gets even closer to the 50-week MA.

There is a possibility, however, that in the week ahead the exchange rate could overcome the MA and break lower, especially because it is likely to be subject to considerable volatility on Tuesday when the Reserve Bank of Australia (RBA) meet to decide monetary policy.

Data from Australia has been good recently suggesting at least a possibility they may relax their neutral stance and adopt a more hawkish stance instead, which means they will be considering raising interest rates as their next move rather than lowering them.

Higher interest rates will support AUD because they increase foreign capital inflows, drawn by the promise of higher returns.

As such even a hint that the RBA may put up rates in the future could propel the Aussie higher and which translates as a lower GBP/AUD rate.

We would ideally wish to see a clear break below the 50-week before confirming a continuation lower, with a break below 1.7425 providing confirmation for a continuation lower to an initial target at 1.7300.

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What to Watch for the Australian Dollar

There appears to be a possibility RBA could alter stance and become more bullish.

Recent retail sales data beat estimates, for example, and employment data has also been good, showing a massive 50.9k rise month-on-month in June.

"These macro pointers suggest the Aussie economy is perhaps gaining momentum and if the run can be sustained then inflation could accelerate in the months ahead. This may make the RBA a little bit more hawkish at this particular meeting. If so, then there is a good chance that the Aussie may rally," says a note from Action Forex.

Other data from Australia in the week ahead includes Home Loans in June, which are forecast to show a 0.1% rise, when it is released at 2.30 on Wednesday, and a speech from Governor Lowe on the same day at 4.05.

The Calendar for the Pound

Instead, persistent concerns of the shape of Brexit negotiations remain the key driver.

In the week ahead, therefore, the main focus is going to be on the odds of a 'no-deal' materialising.

Prime Minister Theresa May cut short her holiday to meet French president Emmanuel Macron at his Riviera retreat over the weekend in an effort to gain more support for her proposals.

In the week ahead there is likely to be much focus on the outcome of this meeting. Early signs are Mr Macron has made it clear he does not want to 'go over the head' of his chief negotiator Michel Barnier, so its questionable whether the meeting achieved any traction for May's plans.

Barnier has been critical of May's plan saying the idea of the UK collecting tariffs on behalf of the EU 'unworkable', but without this element of the deal the UK will not be able to forge unilateral trade deals with third parties, killing the dream of new alliances, and making it completely unpalatable to already-sceptical Brexiteers.

May has already had problems uniting her party behind her plan and there remain many dissenters who think her proposals are too concessionary.

She therefore lacks any further negotiating slack to compromise with the EU, and this is why governor Carney has raised his risk assessment of a 'no-deal' outcome.

May's has given as many concessions as she can, yet it's not far enough for the EU. An intractable deadlock appears to be the new threat on the horizon and currency markets are expressing this by keeping Sterling under pressure.

From a hard data perspective the week ahead is fairly quiet, which is likely to further magnify Brexit as a driver.

The main release is Q2 GDP on Friday August 10 at 9.30 B.S.T, which is forecast to show a 0.4% rise after Q1's disappointing 0.2%.

Q2 GDP will be important mainly as a benchmark for comparing Q1 - if it really does come out at 0.4% then everyone will be relieved at the rebound and those who said the slowdown in Q1 was just a 'blip' due to 'the weather', will be vindicated. If, however, Q2 also shows a slowdown then economists will start to wonder whether this part of a deeper more troubling decline. Sterling may react.

Other important data in the week ahead includes the Trade Balance in June, released at the same time as GDP, which is forecast to show a -11.95bn deficit versus -12.36bn previously.

Industrial production is also out at the same time and forecast to show a 0.4% rebound in June. Manufacturing production, likewise, out at the same time and expected to show a 0.3% rise in June.

The Royal Institute of Chartered Surveyors (RICS) house price monitor is out at 00.01 on Tuesday. it showed a 1.1% positive score in June. The RICS monitor is composed of survey answers from surveyors about whether they think house prices have gone up, down or no-change.

Business Investment on Friday at 9.30, Halifax house prices and the BRC Retail sales monitor are out on Tuesday, and New Car Sales on Monday morning at 8.00, are further releases on the UK economic calendar.

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