Broken channel! The AUDUSD pair had tested the upper and lower bounds of the descending channel repeatedly over the past several weeks, and finally broke through yesterday, piercing to the topside. The pair also broke past the previous high at .8150, and looks like it may be headed for higher highs. Seeing as the pair has made a strong move since last week, we may see a retracement before it continues its upward movement. It may find support at the .8000 (psychologically significant) or at the upper bound of the former descending channel. Will the pair test for a new yearly high? Or could the strong rally be done?
Boom! The pair finally broke out and pierced through both the falling trend line and resistance at 1.4150 yesterday, taking the pair all the way up past 1.4200. If this kind of momentum continues, buyers could take price all the way to this year’s high at 1.4339! But wait… 1.4250 is still holding on as this served as resistance all the back last June. If buyers lose steam and sellers take control again, we may see a retest the broken resistance at 1.4200 and even 1.4100. On the flip side, if price does head upside, this year’s high would most likely prove to be a tough nut to crack!
A 240-minute chart of GBP/USD is shown above. After trading back inside the double bottom formation, where it earlier made a false breakout, the pair finally broke free and is now trading well above the formation’s neckline. Currently, the pair is seeing a little bit of resistance as it approaches the top of the weekly ATR and the psychological 1.6600 level. The stochastics is also indicating the conditions are already overbought. For this reason, I see the pair to consolidate for awhile between the 1.6500 and 1.6600 marks. In my opinion, the pair has still some room to move higher since the target price (computed by projecting the height of the formation from the point of breakout) at 1.6700 has not yet been achieved. If the price breaks the resistances at 1.6600 and the top of the weekly ATR then the pair can easily reach the said target. Moreover, the probability of it heading north is higher because the uptrend line is still intact. Nonetheless, the pair may head lower until it finds support at 1.6400 and the neckline if it closes below 1.6500.