Sterling traders positioned for an upward break relative to the Aussie dollar may be rewarded ahead of next week's UK’s consumer price index (CPI) data (18 Feb). Increases in the cost of living are expected to come in unchanged at 2% year-on-year, a figure which would help Bank of England governor Mark Carney fend off gathering calls for an interest rate hike.

Carney has a made a name for himself during his short tenure at the Old Lady of Threadneedle Street by implementing what is known as 'forward guidance' in relation to central bank policy. Yet he is already backtracking from this stratagem and traders should take the Bank of England's unemployment and inflation target levels with a pinch of salt if last week’s positive jobs data were any guide. While the upcoming inflation figure is likely to remain at the desired level of 2%, Carney will probably argue this bolsters the case for keeping interest rates unchanged at their record low of 0.5%.

At 7.1%, unemployment is already within touching distance of the Bank of England's 7.0% goal and should CPI creep higher, the Canada-born Carney could be asked a few tough questions about when he will look to tighten monetary policy. He may respond by simply moving the goalposts and in the event next Wednesday's (19 Feb) monetary policy committee meeting minutes show another 9-0 clean sweep against higher rates this would explain why sterling is losing some ground against the Australian dollar.

The Antipodean counter is a risk-on asset and the loss of momentum in global equities, for instance, relative to bonds and even gold, would normally bode ill for the currency. Comments from Reserve Bank of Australia (RBA) governor Glenn Stevens in January that the Aussie is near fair value are nevertheless giving it a bid, especially in the context of the RBA's decision earlier this month (4 Feb) to leave interest rates unchanged at 2.5%.

Near-term fundamentals look to favour the Aussie but if global stocks do lose their balance then its progress is likely to come to a fresh halt, to sterling's benefit.

Key levels: The slight retreat in GBP/AUD may set alarm bells ringing for sterling bulls. The recent move that touched a low of A$1.8117 looks to have bottomed near the A$ 1.8196 level, a key 50% Fibonacci retracement from the A$1.6642 nadir. The market is likely to consolidate as it digests the MPC minutes but should traders see a bullish confirmation with a close level above the 61.8% Fibonacci zone at $1.8563 then upside targets of A$1.9085 could come into play. Downside stop losses are likely to be positioned around the recent A$1.8117 nadir while an upside target of A$1.9750 offers a potentially healthy risk/reward trade set-up.