The GBPAUD’s Drastic Decision: Major Reversal or Huge Breakout?

The main question is: will the GBPAUD uptrend have one more push or will the reversal set in? This article will review the facts and analyze which levels it deems as critical for the any potential long or short trades on this pair.

THE BIGGER PICTURE

The 5,000 (!) pip uptrend on the GBPAUD lasted 9 months but grinded to a halt this year as price started to pullback quickly. Whether the bearish price action is a retracement or the start of a reversal depends on the price reaction to the weekly uptrend line (magenta).

A break of the support line has a high chance of leading to a massive reversal potential; whereas a bounce at the trend line keeps an uptrend potential intact.

25- 7- 2014 ga w

DAILY BEAR FLAG

The daily chart is showing a trend channel (orange lines) to the upside, but the channel could easily become a bearish chart pattern called the bear flag (orange trend lines) because price is moving very choppily and correctively between the trend lines (orange).

  1. The confirmation of the bear flag formation occurs when price breaks below the bear flag and weekly trend line support.
  2. A failure of the bear flag is likely when price manages to break above the resistance (purple) trend line.

25- 7- 2014 ga d

TARGETS BREAK OUT

Once price manages to break out of the consolidation, a nice up or down trend could develop and traders can capitalize on sections of it via the Double Trend Strategy and template. This is how trend traders could capitalize in bigger breakout setups.

  1. The bigger targets however for the downside are the confluence of -27.2% Fibonacci target (blue), the -61.8% target (purple), and 38.2% Fibonacci retracement level (orange) at 1.7350 – 1.7450.

25- 7- 2014 ga d2

  1. The bigger targets for the upside are the Fibonacci retracement levels (purple and blue) but price first needs to clear above the top of the channel (orange) as well. When price manages to break above the 61.8% Fib (blue) at 1.8415, then some space is available up to the 78.6% Fib retracement at 1.86.

By keeping an eye on these “lines in the sand” the trend trader is ready to jump on board of the pip train.

GBP strength or AUD weakness: what are you expecting? I personally expect more GBP weakness but let’s see if the support trend line indeed breaks.

Happy Trading!

 

 

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Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).
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  • Chris

    Thanks for the feedback Griffin. The trend can always change indeed. We had strong weekly momentum to the upside so that is certainly a good chance. Will be waiting for signals on the daily and weekly charts for that turn.

  • griffin

    Personally iam expecting the pair (GBPAUD) to go up with the potential of hitting 2.0668