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The strength and weakness table showed the Australian Dollar to be overbought and the Great British Pound to be oversold. This highlights a divergence in the currencies. This usually leads to a reversal of the current trend, GBPAUD is currently in a down trend so we should expect a pullback in the trend or a reversal.
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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In this video, we’re going to go through GBP/AUD as the trade has triggered. We’ll go through what we’re looking at, why we’re looking at a potential long opportunity back up into these lows on a reversal, and what could potentially happen.
Daily timeframe
The daily timeframe is pushing nicely to the downside. It’s been bearish for a while now, and the price has come back into a key supporting area.
You can see that the price has reacted to this level recently. You’ve got these lows, this high here, and these lows here.
When the market was here before, the market was reacting to this level or zone.
What I’m looking for now is for the price to push back down into that area. The weekly is going into this oversold territory so I’m looking for the market to rebound back up.
I’m not looking for the market to go all the way back up into these highs though. It’s too soon even to predict that, but what I’m looking for is a short-term pullback on the overall downtrend.
Now, this is a bit of a riskier play because it is a reversal opportunity rather than a trending opportunity. But, what I like is the market has come down. It retested this area four times, then we had a nice bullish higher high higher close candle.
This gives me the opportunity to then look at that reverse, or if I were to buy the market, where is the market or the trend most likely to continue on a downtrend? It’s previous lows.
If we look at this area here, these are the previous daily lows. So, if I were expecting to trade short, I’d be looking for the market to come back up into these lows to go short. That’s the most ideal area.
Four-hour timeframe
I can trade it back to that point on a four-hour due to the change in cycle. If I go down, we can look at the eight-hour change.
But if we look at the four-hour, you can see that the market came in, bounced numerous times, then formed to higher highs.
You can see a pull back, and a new higher high there. What I’m looking for now is for the price to find this area as support and continue to the upside.
If it takes these out, our idea is invalid. We were wrong; that’s why we have our stop losses in place. But, I’m looking for the market to form a new high. If it pulls back into an area of interest, then look for the market to go long into these swing lows.
Another thing, if you’re not in this already, you can actually look for a change in cycle on the lower timeframe. So, if I place this zone here, what I’d be looking for is a change in cycle.
30-minute timefrrame & 15-minute timeframe
If I go to a 30-minute or even a 15-minute timeframe, I’ll be looking for the price to change. So, if you look at the 30-minute timeframe, you can see that the price has pulled back like so.
You could look for a long opportunity from there if the market takes out this high here. That’s another option for an intraday position. Keep an eye on that one as well.
As I’ve said, if the market continues to push down and break through the lows, then our idea is wrong and we’re out of the trade. That’s the whole point of the stop-loss.
One-hour timeframe
The one-hour chart is very similar; looking for a break of these highs through here. But, the zone seems to be held at the moment. We’ll see how the next four-hour chart candle plays out. If it turns out to be bullish, then fantastic. Hopefully, it continues to the upside.
I hope you enjoyed this quick video update on GBP/AUD. It is the chart to watch on a reversal point of view this week, and I will catch you in the next videos. Cheers!
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