Is GBP/AUD Ready to Complete a 'Double Top'

GBP/AUD traded lower today, after it hit resistance at 1.9220, near Wednesday’s and Thursday’s peaks. Although the rate is still trading above the upside support line drawn from the low of December 23^rd, it has distanced itself from that line, while on the 4-hour chart, we see a possible “double top” pattern forming. For now, we will stand flat, but if the double top is indeed completed, we will turn our eyes to the downside, perhaps for a deep correction.

The completion of the pattern could be signaled by a dip below the 1.9095 zone, which acted as a decent support yesterday. If so, more bears could wake up and drive the battle towards the psychological zone of 1.9000, marked slightly below the high of January 17^th. The rate could rebound somewhat from there, but if it stays below 1.9095, we would see decent chances for the bears to jump back into the action and push lower, perhaps bypassing the 1.9000 hurdle. Something like that could set the stage for the crossroads of the aforementioned upside line and the 1.8895 support, defined by Tuesday’s low.

Shifting attention to our short-term oscillators, we see that the RSI, although above 50, points down. It could fall below that equilibrium line soon. The MACD is also within its bullish territory, but below its trigger line, pointing south as well. Both indicators suggest that the pair has run out of positive momentum and corroborate the case for some near-term declines.

On the upside, we would like to see a clear and decisive break above 1.9255 before we start examining whether the prevailing uptrend has resumed. Something like that would confirm a forthcoming higher high on both the 4-hour and daily charts and may set the stage for the 1.9365 or the 1.9385 barriers, marked by the peak of December 17^th and an intraday swing high formed the day before. Another break, above 1.9385, could extend the advance towards the 1.9515 territory, near the highs of December 13^th and 16^th.

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