Sell on Strong GBPAUD?
GBPAUD is indeed in a bullish trend, but it seems difficult to break the daily resistance
The increase in GBPAUD is unquestionable. This pair already looks bullish even before the Bank of England (BoE) announced an interest rate hike last December. The policy of the British central bank certainly pushed the GA even higher. But technically, there are signs that GBPAUD is struggling to continue rising beyond the daily resistance.
Fundamentally, the UK, which continues to improve its economy, still seems overwhelmed despite increasing interest rates last December. It takes a process to feel the impact of the interest rate hike, which does not necessarily reach the target instantly. Evidently UK house prices are up 10.0% year on year. In addition, political tensions between Russia and Ukraine are feared to trigger worse inflation globally. Australia is also being hit by the Omicron virus and is focusing on restoring the health and well-being of its citizens.
Quick Recap on GBPAUD
The UK's better economic condition than Australia's is reflected in the GBPAUD exchange rate in recent times.
Let's dive in a little deeper to see how AUD/JPY fare on multiple timeframes:
GBP/AUD Monthly Technical Analysis
From the monthly timeframe, it appears that GA is currently struggling to overcome the monthly resistance at 1.9000 which is also the level where the 200 MA on a monthly basis is blocking GBPAUD's rise. Last month's candle closed weak bearish and easily, in January this GA has passed the highest level in December. It should be noted that GA is still above the 50 and 100 MAs, and continues to form a bullish structure on the monthly timeframe.
GBP/AUD Weekly Technical Analysis
Last week, GBPAUD closed weakly bullish and failed to pass the highest level in the previous week. Now the weekly candle looks bearish with it has passed the lowest level last week. The weekly candle that will close in a few hours gives a sign that it is very likely that the price will close lower this week.
GBP/AUD Daily Technical Analysis
We can describe an uptrend line that forms an ascending channel or rather an ascending triangle because it forms a narrowing angle. Currently GA appears to be at the top of the triangle and it is very possible that the price will correct down towards the bottom of the triangle considering that this area has not been retested since the beginning of this year. Yesterday's candle also closed bearish even though it failed to penetrate the daily support area.
Trading idea for GBP/AUD
For more details, we will top down to H4 where the Quasimodo pattern appears which might be an entry opportunity to anticipate the correction from GBPAUD.
Order: Sell Limit
Stop Loss: 1.91000
Target 1: 1.88800 (50% + BE)
Target 2: 1.88000 (25%)
Target 3: 1.87500 (25%)
Total Risk: Max 1% Equity (High Risk Setup)
Reason: Quasimodo pattern and confluence up-trendline resistance.
ZFX Analyst’s Predictions
Inflation has risen sharply in most developed countries, reflecting global increases in energy prices and supply chain difficulties. The UK is no exception, which experienced the highest inflation since 1992, prompting the Bank of England to increase its country's interest rate last December from 0.1% to 0.25%. The impact has not yet been felt, and the British government has continued to adopt a constructive approach to economic control. The BoE is also concerned that labor shortages and wage pressures will cause inflation to slow down again.
Australia's workforce accelerated in December with the unemployment rate dropping to its lowest since 2008, showing strength that will help the economy cope with the current spike in coronavirus cases across the country. Corona that hit Australia was quite severe and overwhelmed the government due to the high number of deaths, reaching 88 for a week.
In Q1 2022, there is a possibility that GBPAUD will move higher given the impact of a rate hike that will soon be felt by the UK, while the Australian government's policy of imposing a lockdown will make the economy slow down even more, but in the short term, there is a possibility that prices will correct, with technical evidence that the price is forming a lower low and is having difficulty breaking through the daily resistance which is also being held by a long-term up-trendline.
Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.
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