GBPAUD Breaks Its Two-Month Range

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$GBPAUD was rangebound for over 2 months as $AUDUSD remained above its 100-day simple moving average (SMA).

GBPAUD daily chart year to date

What occured last week, however, was a bullish breakout to the upside as the $AUDUSD traded below its 100-day SMA for the first time since July 2010. This breakout broke above previous support and former highs on the $GBPAUD daily chart. And though price found resistance at the 1.6500 major half point and large quarter point, its close above the 1.6250 large quarter point was still a major bullish development.

GBPAUD hourly chart

GBPAUD daily chart March 20, 2011

At the market open, price managed to respect the 50% Fibonacci level of Friday’s price action despite the gap higher. Since then, the $GBPAUD has fallen to lows at the 50% Fibonacci retracement level of the entire breakout at 1.6158. Now that the pair has corrected, I am looking for prices to move higher back above 1.6250.

However, given that bias, I cannot ignore the fundamental developments of the new trading week either. Last week, the AUD suffered due to its proximity to Japan, markets pricing in a rate cut from the Reserve Bank of Australia, and another Chinese reserve ratio requirement hike on Friday. This new week, however, may bring a different sentiment as geopolitical upheaval and natural disasters seem to be stabilizing enough for the markets to feel hopeful and risky again.  That could be AUD-postitve and push the $GBPAUD lower still. Plus, the moves of last week certainly fall into the “too-much-too-soon” camp and further correcting could ensue. If prices continue to fall, look for possible support at 1.6120, 1.6100, and 1.6070 which is also the 61.8% Fibonacci retracement level of the breakout rally.

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