Do you trade cross pairs?
In this video we discuss the best time to trade them and an opportunity on GBPAUD.
Watch the video to learn more…
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
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Recently, we spoke about a potential short opportunity forming on GBP/AUD, and I just wanted to take a little time to discuss why and when it’s good to look at cross pairs and just develop this potential position on GBP/AUD – whether it’s a viable position or not.. It’s almost like what’s going on with the cross pair here, the CAD/JPY and GBP/JPY.
The important thing to note is when you’re trading a cross pair, you’re trading two majors against each other. Not a lot of people understand that. A lot of people think I’m just trading in the GB Pound against the Aussie, no. What we’re trading here is GBP/USD versus AUD/USD. Then we have to ask ourselves the question: if I want the price to move down on this chart? So let’s just take, for example, the move here, through April to May, the market moves to the downside. Now, what is occurring here? Well, what we’re looking at is the fact that the GBP/USD at that point is likely moving lower. The GB Pound is getting weaker, right? The AUD/ USD at that point is probably gaining strength. Because the AU Dollar is now not the base, it’ll be the term. So that means that the AUD/USD is probably climbing to the upside. That’s what we saw this downward move, here. We need to look at that and say to ourselves: Well, are we going to get that situation again?
Now just to kind of prove the point here – if I were to go to Aussie and we look at the start of April, we can see that the price, moved in this uptrend. We can see that, just through there. So let’s just say what was that on GBP/AUD – let’s make it a little bit accurate – let’s just say at the top of that move was around the start of April, the first lower highs came in at the 16th. The 16th of April is around here, in Aussie – start of April, down through here.
If I was to go to the GB Pound at that point, what was the Pound doing at that time? It might be making similar moves, but it may not have moved as aggressively. But look if we take a look at GB Pound, it’s more sideways. So, the GB Pound is not as strong as the US Dollar at this point because the market is ranging.
Look at Aussie, very strong. That’s what causes this downtrend, through here. Now, we have to analyze the same situation because we want GBP/AUD to potentially lower.
So if I go to GBP/USD and look at it now, my price is predominantly moving higher, Right? You can see that. However, if we put in a couple of lines, we can see that the price has recently retested a triangle pattern or consolidation pattern, t hen retest the highs of this channel.
So, to me, the market is impulse lower. It’s making its way back up, and we’ve recently retested a decent area of the structure. Now, if I look left, there’s an area here where the market found resistance, broke through, found a bit of support, and broke through. So the market’s back up at this point. So, the way I’m looking at this is, we could potentially see the market breakdown and work within this channel. That, to me, suggests that yes, we may be seeing GB Pound on that move to the downside. Now, we also have to take into consideration that we may get another spike up or consolidation and breakdown, or if it does break high, then it invalidates our idea. But then we need to go and look at the AU Dollar because I want to be looking at the potential for the GB Pound to move lower. At this point, it’s currently rejecting this level.
If I go to AUD/USD, what is the situation here? Now, the situation is a little different to the GB Pound as we didn’t necessarily have that impulse move. The market came back, retested key support of 0.7, and then it changed cycle. The price is moving lower, but it capped a little bit at these lows, or these previous highs, or this supporting area.
So, what we may see from Aussie – now ideally, when I look at these charts I’d love to see a pullback, to here, just because that would be great to look for long opportunities to come in. However, the price is at an area where it has bounced off in the past. So, we could see the market just stalling here and then potentially continue to the upside. If that’s the case, then Aussies will remain strong. The GB Pound will start to see some weakness then drop through with it.
Looking at GBP/AUD – well, we’ve found a bit of a double top pattern and broken through, but we’re retesting that structure now. I’ve been looking at my lower time frame, as the four-hour time frame and it’s going well. At the moment, price is retesting that structure. We’re getting a bit of an overbought condition on the RSI. This could lead us to a potential for the market to drop lower, and we will have the confidence of that because GBP/USD is at resistance, and AUD/USD is trading above this slight support.
I hope that makes sense. I hope you enjoyed that video update. If you did, please give it a thumbs up. If you have any comments or questions, drop in the comments section below, and I’ll speak to you soon.
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