The Australian dollar is on the move early this week, pushing GBP/AUD to rest the bottom of a clear range. Will we see a short-term breakout or reversal ahead?
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What to Watch: GBP/AUD
Checking out the one hour chart above of GBP/AUD, we can see a pretty clear ranging pattern with sellers holding the 1.8350 area and buyers defending the 1.8150 are pretty well. We’re currently seeing a retest of the bottom of the range, which presents a potential opportunity for both bulls and bears on the pair.
If you’re a bull on the pair, this could be a fresh buying opportunity to play the strong support behavior at these levels we’ve seen throughout August. We’ve also got stochastic showing oversold conditions, another technical argument that may draw in short-term buyers / spark some profit taking from the bears.
No major catalysts ahead through the next session, but if broad risk sentiment flips negative on a fresh catalyst (i.e., negative U.S.-China tension headlines, global economic recovery fears), then the odds of a bounce at current levels rise considerably. With a good catalyst, a move to the middle of the range is reasonable within a session given the daily ATR of around 140 pips.
For the bears on this pair, we’ve got broad positive risk sentiment currently pushing the pair lower, a theme that could continue with no major news / headlines / data expected for the rest of the session.
This makes a break below 1.8150 an attractive short entry signal, but given the strong move lower on the session, it may be a good idea to wait for a bounce or scale into a short position up to the middle of the range. In that scenario, look for bearish reversal patterns between 1.8200 – 1.8250 before considering a short idea.