GBP/AUD Price Analysis: Finds some support ahead of 1.7300, not out of the woods yet

• GBP/AUD prolongs its bearish trend for the fourth straight day and dives to a multi-month low.
• A convincing break below the 200-day SMA and the 1.7500-1.7480 zone favours bearish traders.
• A slightly oversold RSI on hourly charts warrants caution before positioning for further downfall.

The GBP/AUD cross extends its recent sharp downfall from the 1.8000 neighbourhood and remains under heavy selling pressure for the fourth straight day on Wednesday. The downward trajectory drags spot prices to a nearly four-month low during the first half of the European session, though stalls just ahead of the 1.7300 round-figure mark.

The Australian Dollar's relative outperformance against its British counterpart comes amid rising odds for an additional rate hike by the Reserve Bank of Australia (RBA) in February. The bets were lifted by stronger domestic consumer inflation figures released earlier this Wednesday, which showed that the headline CPI accelerated to the highest level since 1990 during the fourth quarter.

That said, a softer tone around the equity markets - amid looming recession risks - might keep a lid on any further gains for the risk-sensitive Aussie. Apart from this, speculations that elevated consumer inflation will maintain pressure on the Bank of England (BoE) to continue raising rates could lend some support to the GBP/AUD cross and help limit further losses, for the time being.

From a technical perspective, the overnight close below the very important 200-day SMA and Wednesday's slump confirm a fresh bearish breakdown below the 1.7500-1.7480 horizontal support. This supports prospects for an extension of the ongoing depreciating move for the GBP/AUD cross. That said, the extremely oversold Relative Strength Index (RSI) on hourly charts warrants some caution.

Hence, it will be prudent to wait for some near-term consolidation or a modest rebound before traders start positioning for the next leg down. In the meantime, any attempted recovery is more likely to confront stiff resistance near the 1.7400 mark. Some follow-through strength, however, might trigger a short-covering rally and lift the GBP/AUD cross to the 1.7500 support breakpoint.

On the flip side, the daily swing low, just ahead of the 1.7300 round figure, now seems to protect the immediate downside. The next relevant support is pegged near the 1.7260-1.7255 zone, below which the GBP/AUD cross could accelerate the fall further towards the 1.7200 mark en route to the 1.7180-1.7175 horizontal support.

GBP/AUD daily chart

Key levels to watch