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.