GBP/AUD:Selling into a corrective bounce
GBP/AUD has seen a sharp plunge from late January’s 1.9222 peak, dropping as much as 10.6% to trade a 1.7175 low in early April. The 1.7175 low remains a reference point, yielding a 1.7180 pseudo bottom that is generating a pullback higher, where the immediate focus rests into 100dma at 1.7876. This defines the range since April to a 4.1% band – this consolidation appears to be a response to the ending of a wedge pattern (falling wedge) that trailed the drop from 1.9222 to 1.7175. On the weekly Ichimoku chart, prices remain under the cloud ostensibly. Overall, the cross remains under a bearish cosh – there are resistance spots at 1.8198, 1.8286 to look out for.
Broadening the time span to that to a multi-year weekly chart, one can see why the decline from the sub-1.9222 double top is seeing a pause into the recent 1.7175 lows. The lows rest on the trendline support that goes back to March 2013’s 1.4381 lows.
There is however no concrete evidence that this trendline support would end up as a Fort Knox support zone, given the cross is generally unravelling broad weakness that has equated to a series of lower highs of 2.2386-2.0856-1.9222. Hence, selling into pullbacks with invalidation points remains preferred.
On the navigation path, the cross saw a clear decline in the offing when it cut under 1.8857 in late February. This has ignited a further sub-divided minor 5 price legs (i)(ii)(iii)(iv)(v) to flesh out price leg 3. The consolidation since early April has the markings of a price leg 4 consolidation, and tactically we sell into the top of the consolidation band, to await the run lower for price leg 5.
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