Buying opportunity on the GBPAUD

Buying opportunity on the GBPAUD

A short/medium term trading opportunity has arisen on the GBPAUD. The Pound has been weakening after the Bank of England came out last week and forecast that the economy would fall into a 15 month recession later this year. Whilst the bearish sentiment was somewhat of shock it was not totally unexpected. On the back of this news, the Pound has been falling against most other strong currencies including the USD and the CHF. The most attractive trading opportunity comes in the form of the GBPAUD pair.

The AUD has seen some strength on the back of the Chinese CPI figures that came in better than expected. The AUD, is impacted heavily by the price of commodities. Therefore, it is important to consider the upcoming volatility around the price of commodities. Ultimately, the current economic environment has led to a situation where the GBPAUD is testing recent support zones.

Technical Analysis

Using multiple time frame analysis, some interesting patterns have been formed in this pair.

Looking at the longest time frame first, the monthly chart it can be seen to break down out of the symmetrical triangle that has been in a consolidation since 2014. This is obviously quite a bearish sign and points to taking a short position. On the contrary, it is still possible that the price will try and reclaim the triangle.

On the weekly chart, the pair is testing a long term support level of 1.72/1.73 AUD. This has remained steady as a support since 2017. Whilst the price is setting near this level and based on previous levels of structure and support, it is likely that the price will bounce to the top of the range. However it would be best to wait until there is strong buying to indicate a reversal.

On the daily chart, the range is even more pronounced and shows that the price has been trading in the range. The range also provides a short term target of 1.7880 AUD as the next target of resistance. Until a clear break of the range is established buying at the bottom, and selling at the top provides a good risk reward trading strategy.