I may well be jumping the gun here and GBPAUD could well break to new highs. However I have noted several technical warnings that the trend is beginning to look stretched and it could be time for a larger correction against it.
Price has failed to rally up to 2.26 resistance. That is not to say we won’t make it there over the coming weaks but the initial failiure to meach this milestone (2005 lows) does show a hesitience to push higher
The Detrended Price Oscillator has stalled at its annualised average. The last time GBPAUD traded this far from its own average was the Jan 2014 high, which was the beginning of a 9 month correction, shedding over 1900 pips in the process.
There appears to be a relationship with the 100% projection. Whilst not perfect (which they rarely are anyway) I believe it is close enough to merit some attention. So whilst I cannot explain it, I can see it.
A Bearish Pinbar suggests a potential top within a Broader Bullish channel. 3 weeks ago GBPAUD printed this near-term reversal warning and price has failed to rally back towards this high. A break below 2.139 confirms the pinbar confirms the pattern and opens up potential for an initial move towards 2.08 lows.
D1 DPO has also reached a natural level of resistance and since retraced back to its own mean. The spike higher marks the level where the DPO reached levels of resistance on D1 and W1 to add merit to this marking the high.
A break below the monthly pivot would also break the bullish channel. However we also have the swing lows at 2.138 which may provide support following an initial break to the downside. I have outlined potential for a triangle or topping pattern to occur. If we are about to witness a topping formation then we can expect volatility and whipsaws to increase whilst the pattern unfolds. So we could take a break below 2.138 as confirmation of trend reversal and target the lower bullish channel highlighted on W1.
For this scenario to play out we would need to see continued AUD strength. The best chance of this occurring is for FED to keep rates on hold this week which will weaken the Greenback and strengthen the Australian Dollar. We also have inflation data from UK today. If this comes in stronger than expected then the Monthly Pivot will likely hold for support and traders can play bullish setups within the D1 bullish channel. However I’ll be keeping a close eye on the highs to see how price behaves as failure to break to new highs will make me suspect a topping pattern is indeed approaching.