Forex Trade Setup: GBP/AUD Long-Term Reversal?

It looks like I may have already missed the boat on my earlier CAD/JPY forex setup so I’m turning to this potential long-term reversal on GBP/AUD instead. Now I’m not quite sure if this is a high-probability setup since the technicals look neat but I’m a bit iffy on the fundamentals. Care to share your thoughts on this one?

As you can see from the chart below, the pair already broke below the long-term rising trend line visible on the 4-hour forex time frame. In addition, a double top has formed right at the peak of the uptrend and price seems to have broken below the neckline as well.

GBP/AUD 4-hour Forex Chart

GBP/AUD 4-hour Forex Chart

Stochastic is pointing up, though, which means that a retest of the broken trend line and neckline might be in the cards. I’m seeing a bit of bullish divergence too, as price made lower lows while the oscillator made higher lows. Could this mean that the breakout was a fake out?

Fundamentals are a little tricky since the U.K. just painted a mixed picture of its labor market with its August jobs report. While the economy added fewer than expected jobs during the month, the unemployment rate still ticked down from 5.6% to 5.5% while the average earnings index showed a faster pace of increase at 2.9%. Inflation readings from the U.K. have been in line with expectations, but both the headline and core CPI indicated declines. Meanwhile, the RBA minutes sounded a bit cautious, as policymakers said they’ll be waiting for upcoming data to see if any rate adjustments need to be made.

I guess I’ll just take a page from the RBA’s book for now and be on the lookout for more economic data that could signal where monetary policy might be headed next. Aside from that, I’ll also be paying close attention to gold prices and other commodity trends that could be affected by the FOMC statement this week. I’ll keep y’all posted!

Cheers,

Happy time

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  • Jayboii478

    Looking at my chart on the weekly timeframe, the GBPAUD has touched a previous support/resistance zone at 2.1390 almost to the pip, as well the daily 55 EMA and 61.8% Fib on my daily chart, are holding hands almost with that support zone. So far price has risen 300 pips from that level at 2.1390. I think it may have been a larger than normal correction retrace for the pair. Fundamentally I just read on Reuters that the Bank of England may be thinking to cut their rates in the near future, but still the currency is remaining strong with other fundamental data like unemployment, retail sales, and average earnings. Overall, I think the pair will stay in a uptrend but personally I am not looking to take any positions until it closes above 2.2000 on the daily chart to break previous high/resistance.

    • Good point! Thanks for sharing what you’re seeing on your charts. Yep, it looks like that support area ain’t likely to break any time soon and the UK is on much better fundamental footing compared to Australia, mostly due to the slowdown in China.

      • Jayboii478

        I posted a comment before but I think my computer glitched out and didn’t post it, but if it did post it I am sorry for the double post! lol

        The GBPAUD might have a long set up for me. It could retrace to the 2.1530 zone which is a big support and resistance between the daily and weekly chart, and price will intersect with my daily trendline there, with my 50% FIB just above that area. I might be interested in that trade to the 2.1750 area

        • Ooh, I see it now. Thanks for sharing your charts. Yep, it looks like a long-term buy on those time frames!

  • Seems like we’re seeing large corrections among pound pairs these days but the overall long-term trend appears to be intact. Might’ve been profit-taking off those GBP and comdoll trades in the previous quarter also, but I also think there’s good fundamental reason to believe that the uptrend might carry on. Let’s see how it goes!