The GBP/AUD has been really good to me over the last couple months. Back in March we identified a “rounding bottom” and then in April we identified a “cup and handle” formation. For me personally, they were some of my best trades of the quarter. And now, the pair is back on my radar for another long setup.
Currently, the pair is breaking a daily downtrend line, which (possibly) is setting up for a longer term flag pattern (see below). This corresponds with the other flag patterns and correlated market setups I am seeing on a weekly basis. Most other markets are pointing to a prolonged period of risk aversion (see weekly copper and USD charts) which would explain the possible rise in the GBP/AUD exchange rate where traders sell the high beta currencies like the AUD and buy back the lower yielding ones like the GBP. With the daily chart breaching the upper trend line and intraday charts showing a possible bullish wedge, the GBP/AUD may be ready to stage another rally to challenge recent highs.
Daily trend line break and possible longer term flag pattern
Intraday bullish wedge pattern sitting on minor trend line support
Above you can also see the correlation the GBP/AUD has to the SPX. Scary, isn’t it?
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Disclaimer: I have no position in the GBP/AUD….yet.