GBP/AUD Reversal Break (1,000 Pips)

The GBP/AUD has been in a surging uptrend for about 2 years…

But you have may have noticed that the GBP has not been among the strongest currencies lately, and conversely the AUD is beginning to build strength.


fpi_gbpaud

The downside of trading against a 2 year trend is that you are trading against a 2 year trend… BUT the benefit is that there is a a lot of room for movement even if you’re just playing a pullback within the trend.

A quick look at the GBP/AUD on a Daily Chart shows you the kind of space to the downside I am referring to:

space_an_gbpaud

 

That’s about 1,200 pips, by the way.

As you can see from my image, I have noted 2 things via technical analysis:

1. The daily chart has broken through the bearish channel that it formed over the last month.

          a. Typically, this is a “Bull Flag” and we see a northern break from this formation, but in this case we see a very strong break to the downside

          b. The channel is by no means a perfect demonstration of the recent movement which is why I have also highlighted the consolidation period  

2. Price has broken the former low point of the consolidation suggesting its seeking lower prices

          a. This is important because after the Feb 20 low, price made higher highs and higher lows suggesting that it wanted to continue the uptrend

          b. Not only did the price not continue upward in the typical “V” formation after making the low, but the break lower was very forceful 

 

We can see that our Feb 20 low IS an important level because price broke and re-tested the price before continuing lower:

gbpaud_retest

The retest of that low (represented by the bottom of my range) simply shows us that the Market did, indeed, know that the level was there and it adds to our pile of evidence that this pair wants to move further.

At this point, there is enough confirming factors to enter the market… And so we did!

You can see from my dotted green line that we have just entered the market and are at about 0 pips as it stands now.

Note that on this trade, we have a massive stop loss because many, many times the market will create a perfect breakout scenario like it did here but shoot back up into the consolidation range later to stop out the breakout traders.

Instead of being stopped out, we’ll add to our position if that occurs and maximize our risk to reward.

gbpaud_add_spots

Currently, we only have half a lot on the trade which gives us plenty of room to add to the trade if such an opportunity presents itself.

My stop is at 2.0070, above the massive psych level of 2.0000 and above the mid-February high around the 2.0 level.

**Bonus: This is a trade we could be holding for a while, so one huge bonus is that we’ll earn positive swap/interest in the account for every day that we hold it.

All in all, we love this trade because it has all the things that make us feel warm and fuzzy:

  • Good Matchup – Weakening Pound vs Strengthening Aussie
  • Very strong technical signs that we’re headed in the right direction
  • Good Risk/Reward Potential
  • Room to Add to the Position and Maximize Profits
  • Safe Level for our Stop to Increase the chances of a Win
  • Positive Swap on a Long Term trade
  • Lots of pips on the TP to make our trading stats look good 😛

 

 

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  • NathanTucci

    How is your account doing on the copier? Hope you made a few % so far!

  • NathanTucci

    Hey Jim,

    We have a long term target that we will most likely not reach. If the trade gets up about 1% we will start locking in profit and trail from there

  • JE

    Ok I was looking at the 3/4-3/6 trade and thinking you were advocating a long term trade not a lot of short term in and out. what is your trgt(s) for current open trades? Jim Edwards

  • NathanTucci

    We do have this exact trade on 😉

  • JE

    I took this trade based on the auguments made and that I have a trade copier account with winners edge, but now I find that they do not have a trade like this on. what’s up?

  • Banmai VN

    It will be get 1.85 and after change the way to up

  • Banmai

    This set is on the way go south. And how long it get your target?

  • NathanTucci

    The AUD data has been pretty good for the past week–better than what people seem to think the sentiment is on it. I think that intrisic value may catch up to it soon and cause the AUD to gain power. The main thing, though is that Australia just raised their rates when we are used to them being pushed lower and lower. To me, that is a clear indication that we may see an upswing on the Australian Dollar.

  • NathanTucci

    I haven’t missed that level at all actually, it is highlighted on my chart. However, if we get a reversal and a fundamental change with Aud gaining strength, I would not be surprised if we moved right through that zone… and if not, we still have over 250 pips to work with in terms of profit.

  • NathanTucci

    HI Johnny, I would totally disagree with that. I have a 530 pip stop loss, so it would take a bit more than a typical news spike to take me out of the trade,

  • Vasilis

    Hi Nathan,

    My broker is FXCM and I use their trading station platform,so my picture is as attachment chart (at 08:00 GMT).

    For me:

    – we have strong up trend

    – it have not broken the support line of the bullish flag

    – there is daily support line (orange)

    – and of course 50 Moving Average

    In conclusion, the short side is premature, for my opinion

    Thank you

  • Kiweed

    Hi Kevin, I live in and out of NZ. This whole website is a scam. There are no good traders here. Have a read of forexpeacearmy. or just google winnersedgetrading scam/review. This will get deleted by that dick head Casey.

  • Kevin

    I live in Australia and I would not be making a trade that the AUD will rise against the GBP. In fact, I would be trading the other way.

  • Casey

    And if the first support area at 1.9200 end up being support the the R:R on this trade is a joke.

  • Casey

    And the other thing Nathan has totally missed the support level at 1.9197

  • johnny

    fundamentally i dont see the GBP being weaker than AUD. a couple of good data from uk and this trade is gone.

  • Casey Scammer

    Help me please??? because i don’t know.

  • My question is Fundamentally do you see the GBP being weaker than the Aud and what leads your to believe that?