Hello Forex Traders,
Back to the Forex market today but I do hope that you enjoyed yesterday’s review of oil and its boom and bust and subsequent rise. All in all it is quite a fascinating price development, to say the least.
Be aware that today there are a lot of news events taking place – the biggest one of course is the FOMC statement from the Fed.
Our analysis today will start with a technical analysis view on GBPAUD. This currency pair was mentioned in yesterday’s Double Trend Trap video summary so it is worth the extra attention in this article.
GBPAUD CHANNEL BREAK
The GBPAUD up channel is a classical example of a well built and defined price action channel. Price neatly respected the top, bottom, and middle trend lines within the channel before eventually breaking out of it.
After the breakout price hooked back to the broken trend channel and used it as a resistance which is often the confirmation of a turnaround and chance of trends. The GBPAUD has lower lows and lower highs on this 1 hour chart and is moving back up now. Is this a retracement for more downside? Let’s investigate.
The 4 hour chart indicates that the move up could have been a potential retracement to retest the top on the left (red circle). When placing a Fibonacci retracement on that down move, then it is clear that price topped out with an exhaustion wick on 4H at the 78.6% and 88.6% Fibonacci retracement confluence.
Also the 4 hour chart is confirming a potential downtrend because price is making clear lower lows and highs. I would not brand this an established trend as yet, but the first signs of downside can be clearly seen. A break of the 1.70 level (green trend line) would most likely act as the confirmation of the downside scenario as price then is breaking through the potential support zone.
1000 PIP FALL?
Next on the list: the daily chart. The uptrend certainly was impressive: 3,000 pips from bottom to top. But the daily chart too is showing lower lows and lower highs, although with relatively choppy movements.
In this regard the move up can certainly be considered a retracement. A break of the top 1.7420 seems an unlikely event in this scenario. This resistance is not only a daily top but a weekly top as well, and is part of a resistance trend line (purple).
Or in other words, price is right at heavy resistance and this surely can push price into a deeper correction. If it does, the various support levels (green trend lines) will cause price to bounce up but the overall trend would be pointed down. The very last target what I would expected is the -61.8% target at 1.62, which in fact could be a turning spot for more upside. Why? Let us zoom out.
Last but not least, the weekly chart. A break above the trend line (purple) seems unlikely at the moment and at the very minimum a Forex trader should expect a retracement down before a move up. But if it does happen, an interesting break out scenario would unfold. The next target would be all the way at the -272 (1.8328) and the -618 & 38.2% Fib at 1.92-1.94.
And now it is easy to understand that any leg down has a strong chance of finding support at the 38.2% of the entire move up at 1.63. And this could potentially be a bouncing spot to go to the -272 (1.8328) and the -618 & 38.2% Fib at 1.92-1.94 as well.
With the GBPAUD right at a mega weekly trend line and top, the currency pair is a bounce or break spot. Both options will lead to big movements. So this pair is certainly on my watch list. 🙂 I am keeping an eye on a potential turn around on the 1 hour chart. Make sure to join our trading room to catch this potential trade.
What do you think of this particular situation on the GBPAUD? What do you think is the most important for your current analysis? Let us know down below! Hope you enjoyed this Forex analysis.
Thanks for sharing this article and Good Trading!
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