Currency - GBP / Australian Dollar

The attached chart shows the three main features of the Sterling - Australian Dollar exchange rate.
1. A flat line across 1.64 which has contained this pair since Oct 2010. That is the main resistance
2. A 200 day moving average line which was resistance and is now providing support at 1.5550
3. Downward trend line which capped this pair for a year but which was broken in the aftermath of the US credit downgrade.
In essence, as long as this pair stays above 1.5430 (trendline) then we can consider this break to have been confirmed and a rally to higher levels will ensue The obvious risk is that this is all overdone and investors go back to seeking the ‘carry trade’; with the ECB expected to cut interest rates and the UK, Japan and US unlikely to make any interest rate hikes for up to 2 years, that could well happen.
The other fly in the ointment for Australia is the prospect of China slowing its economy. They announced another rise in inflation this week and Chinese banks are being forced to hold increasingly large capital reserves so the Chinese economy may slow and that would dampen Aussie exports.