There is a minor crack though
The GBPAUD has been rising over the last month of trading. In fact over that time., the pair has risen by 9.19%. A better GBP tone and the cut in rates by the RBA has been the fundamental catalyst for the surge higher
Over the last few days, the price extended above trend line resistance (the pair is trading at the highest level since 2009).
The first line (red trend line) connects the highs from September 2014 and December 2014.
The 2nd trend line (blue line) is a parallel channel line. This line is off a singular point. So it is not a true channel. However, I often find that the market will construct targets by fitting in a topside channel trend line - especially during times when there is limited technical levels to target. Since the GBPAUD, is trading at the highest level since 2009, there is not much to target.
On Wednesday the 1st trend line was broken. However,it wasn't until yesterday that there was a close above that line.
The higher trend line was broken as well, but there has not been a close above that line.
Today, the price is lower. The high price today comes in at 1.9914. The fitted topside trend line comes in at 1.9936. Staying below gave sellers something to lean against.
From the daily chart, the pair is still more bullish. A break of the topside trend line should solicit more buying. Having said that the failure of the break may raise some eyebrows that perhaps the top is close to being in place. A fall below the 1.9739 would confirm that possibility.
Drilling down by looking at the hourly chart (see chart below), the technicals are still more bullish on this chart too. Specifically, the price remains
- above the 38.2 to 50% retracement area between 1.97249 to 1.97945 (NOTE the 1.9739 level from the daily chart is between these extremes), and
- above the 100 hour moving average (blue line in the chart below moving higher toward the 1.9725 area)
The price is also above the lower trend line and 200 hour moving average (green line). Over the last month, the price has only dipped below that line briefly (on Tuesday). If the sellers are to wrestle more control, a break below this line will be needed.
Overall, the GBPAUD has shown a crack in the trend with the price action over the last few days. However, that crack is still relatively minor and there is no major structural damage to the trend.
If the aforementioned levels can be breached on the downside, that crack may start to cause more profit taking and a larger correction. Even so, be prepared for the possibility of the pair starting a move lower, only to have it snap back. You can be sure that in a 9.1% surge over the last month, there were times traders thought the move was over, only to have it continue the push back higher. So trade the short side if the technicals start to confirm a top is in place, but do it with caution.
