GBP/AUD “Rounding Bottom” Formation

I posted this chart yesterday on StockTwits via @pipczar:

The reason why this pair is on my radar is because fundamentally (and obviously technically) this tides may be shifting in the short term. Longer term, this pair is in a significant downtrend, however the near term “rounding bottom” of this pair signals a trend change could be in the works.

Fundamentally, with recent calls from S&P (and others) for possible slower growth in China, the most directly affected currency would be the Australian Dollar. It is no secret in the markets that the main beneficiary of China’s growth in recent years has been the AUD. In the event that China does slow down in GDP growth the single currency could be hit the hardest. Also considering the inflationary pressure (maybe temporary) that the developed economies are feeling may prevent the BOE (Bank of England) from further asset purchases (QE) in the near term therefore shifting interest rate differentials in the near term back to the GBP. The negative in trading the GBP/AUD long from here is the negative “carry interest” you would pay to your broker holding overnight.

One other thing you should note as well, take a look at the inverse relationship the GBP/AUD has to the SPX. The peaks and troths coincide very well.

Disclaimer: I hold long GBP/AUD and plan on holding for the next several sessions

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About Blake Morrow

Blake Morrow is the Chief Currency Strategist for Wizetrade. Blake has over 15 years of trading experience and has been a co- owner of a Dallas based brokerage firm and LiquidTrader Technologies. Currently, Blake does analysis daily for thousands on individual traders, also has appeared as a regular analyst on WizetradeTV, Traders Television and MBT Vision. Blake has also managed 6 figure trading accounts and is a seasoned individual investor in equities and FOREX.