The GBPAUD Story and the Clues it Leaves Behind for Detectives

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The GBPAUD is known as a “fast mover”. It typically covers more pips in a few hours than some pairs do in a day (or more). Whether a Forex trader likes it or not, impulses on this pair last long (in time) and go a far distance (in pips). Hence, the profit potential is massive; yet so are the risks. Recently,

3 price has gone more “bonanza” than usual.

Here is the story:

Last week the GBPAUD had a massive spike up: price covered almost 1,500 pips in 18 days. That is the same pip size of the EURUSD downtrend from the high of 1.40 to the low of 1.25 – yet it took the pair almost 4 (!) months to complete.

What next?

It’s time for you to be the detective and search for clues! This is, of course, followed by an analysis just as proper detectives do.

BULLISH CLUES

Clue #1

The GBPAUD has been in a bigger long-term uptrend. The bottom of the last swing has not been broken (purple circle) and when placing a Fibonacci retracement on this swing, it is clear that the GBPAUD bounced strongly at the 78.6 Fibonacci retracement (green) level.

14- 10- 2014 ga 1

Clue #2

The massive momentum caused price to break through the rays of various resistance trend lines (purple). All of these trend lines are correct (read more here) and could act potentially as future support (if price retraces lower).

BEARISH CLUES

Clue #1

The most interesting piece of information is the fact that the GBPAUD started the week with bearish daily engulfing twins (purple box), which could set a bearish tone for the entire week of trading. The bearish twins also broke any bullish expectations of uptrend continuation: the up spike swing is finished.

14- 10- 2014 ga d

Clue #2

The other interesting fact is how the daily chart neatly respected various Fibonacci levels starting with the 38.2 Fib, then the -27.2 target, the 50 Fib (although shortly) and then recently the 61.8 Fibonacci level. See the red circles at the magenta Fib tool in the screenshot above for a better view.

BULL – BEAR LINES

The ambitions of the bulls are low and have been put in the fridge for the moment, but the bears are not dominating either. Price has yet to break the most recent bottom and hence a triangle could always occur (purple circles and lines). No winner can be predicted until price breaks away from this zone:

  1. Bullish territory is above the triangle (light green circles)
  2. Bearish territory is below the triangle (red circles)

14- 10- 2014 ga 2

Once price does break higher or lower I will be cautious with the Fibonacci levels:

  1. To the upside I see the 78.6, 88.6 and 100 Fibonacci levels (orange) and the -27.2 target (blue) as resistance (red arrows).
  2. To the downside I see the broken trend lines (green) and at the 38.2, 50 and 61.8 Fibonacci levels (blue) as the primary support levels (green arrow). The lower 78.6 and 88.6 Fibs could be stalling spots but a downtrend continuation towards the -61.8 target seems more likely at that moment (dark red arrow).

These are the bear and bull lines, their targets and future bouncing spots in my opinion.

What is your TRIGGER for the GA? Let us know or post a screenshot!

Happy Trading

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