Technical Sentiment: Neutral
Key Takeaways
- The Australian Dollar cooled off after gaining rapidly last week;
- Support confirmed again at 1.8150, double top resistance at 1.8367;
- A range break-out will represent the best trading scenario.
Extremely slow start to the week, as the market is waiting for RBA Gov Stevens Speech due later today. On Tuesday, European traders will focus on Public Sector Net Borrowing and CBI Industrial Order Expectations, but the real mover will be the quarterly Australian CPI.
Technical Analysis
Last week’s price action indicated a moderate change in the trend’s personality. This change signals an overall weakness in the uptrend after GBP/AUD rejected off the resistance at 1.8367, forming a perfect double top reversal pattern. However, the subsequent bounce from the most recent Higher Low at 1.8150 changed the bias once more to consolidation, since both the upper and lower boundaries have now been perfectly confirmed.
The overall bias for the Sterling Pound remains bullish; yet traders might force a larger correction if AUD picks up again. If GBP/AUD breaks below the support at 1.8150 (confluence with 38.2% Fibonacci Retracement level between 1.7820 and 1.8367; with the 4H timeframe 200 Simple Moving Average rising to this area as well in the coming trading sessions), the bullish configuration of Higher Lows from the beginning of June will be invalidated. This would trigger a sell-off towards 1.8094 and eventually down to 1.8029, where the retracement will be completed on the 61.8% retracement level coupled with the support confirmed several times in June and the 200-Day Simple Moving Average.
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Within the range, 1.8255 should be marked as an intermediary price pivot zone for GBP/AUD. A rally above this level will open the way back to the resistance, which in turn could spark a bullish range break-out. Long term target would then extend as high as 1.8570 (range projection towards the upside) and 1.8600 (resistance from January-February 2014).
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
