GBPAUD correction may be over; Targeting 2 AUD

Recent price action suggests that GBPAUD has witnessed a significant swing low at 1.72 and for price to now move on to make new highs.

Technically:

The strong rejection of the 1.72 swing low appears to be a 'V-Bottom' and is normally associated with significant lows on stock markets (such as the GFC lows on Global stocks, or the Wall Street Crash on Dow Jones in 1929.) This also coincides with the 38.2% fibonacci retracement from the March '13 low to Jan '14 high. If the correction is complete then we have to assume a resumption of the bullish trend and to break to new highs above 1.912, to target 2.

Price is now approaching the upper resistance from the bearish channel which is also around the 200-day MA, which suggests potential for a retracement before the bullish movement continues. But when we clear this area we could be heading towards 2.0 faster than some suspect.

Whilst GBPAUD can spend months at a time in corrective and messy price action, it also has the ability to travel over 2000 pips in as little as 3 months when a movement gets underway (Blue arrows).

Catalysts:

Mark Carney continues to make noises about rate rises as we head into the Scottish Referendum. I suspect we will see a 'NO' vote for Scottish referendum, which should see rapid Sterling short covering to help GBPAUD continue its bullish path.

The speed of this advance will be greatly improved if we continue to see the unravelling of AUD longs over the coming weeks. External factos could include continued weakness from China or increased geo-political tensions from Ukraine and Iraq. Domestically we may see Aussie weakness from rising unemployment, continued below-trend growth or signs signs that the housing market in Australia is finally beginning to lose steam.

Share: Analysis feed

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed