Welcome back to another article from AspireFX. Today we are looking at the past movements on GBPAUD and where price could potentially head next.
Starting on the weekly timeframe, we can see after a clear break of 1.95000 we had indecision printing a doji candle with properties of a bullish hammer. Since then we have seen a retest of 1.95000 and a meltdown in price with a weekly closure below 1.90000. Looking left we have support at 1.89000 and 1.87500. Should we see these levels break, 1.85000 will be the next level to target.
Taking a closer look at price action on the daily timeframe, we can a break and retest of the ascending trend line signalling a short opportunity. Looking at the structure, we were creating higher highs and higher lows, however as of recently we have seen a lower low form followed by a lower high. Should we look closer, the current price action has formed a lower low as well – this is showing more pressure to the downside.
On the 4 hour timeframe, we have plotted a fibonacci tool from body to body of the candles and we have a perfect 78.6 retracement. To add to this, we also have the break and retest of the trend line and 1.95000. The first target according to the fibonacci is 1.88115, below that we have a key level of 1.87500 and 1.85000.
On the 1 hour timeframe we have an outer trend line and an inner trend line applied to the chart. 1.92000 has also been marked up as a potential level should we see upside.
We have also boxed off the consolidation, awaiting a breakout on either end. Should we break to the upside, we have these levels and trend lines as potential levels for reversals and execution points for short trades.
On the 45 minute timeframe we have the prior weekly high plotted at the top where we saw a spike above enticing buyers into the market in Asia on the 4th of May. Price then drove itself back below and formed a head and shoulder. We then saw price collapse from the prior weekly high to the prior weekly low. Currently price is ranging and we await a breakout on either end. The overall sentiment is bearish for GBPAUD looking for continuations into 1.85000.
Fundamentally, we have Brexit uncertainty as there is a lack of progress between the UK and EU officials. The government also has a firm stance on their “no extension” to the post Brexit transition period. The risk of a hard Brexit is growing and this is a major negative. This week we have GDP Q1 , GDP MoM and GDP YoY for the Pound. Manufacturing production monthly data is released with these data points on Wednesday. Thursday we have the BOE Governor Bailey speaking which will be important to note a dovish/hawkish tone.
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