Technical Sentiment: Bearish
Key Takeaways
- Mortgage Approvals in U.K. decreased to 61K in September;
- Sterling Pound traded lower across the board on housing market worries;
- GBP/AUD breaks major triangle formation and 200-Day SMA;
- Below 1.8108, traders will target 1.8000 followed by 1.7943 and 1.7820.
While some traders are patiently waiting for FOMC Statement, with a narrow focus on greenback, Sterling Pound sellers are cashing in on a major sell-off that could extend for several more days.
Technical Analysis
Following September’s major bullish rally, GBP/AUD managed to correct 38.2% during the first half of October. After overbought conditions were shed, volatility and daily ranges decreased at a steady pace in recent weeks. Price action, however, continued to respect a steady a strong configuration of Lower Highs while sellers were unable to stabilize price below the 200-Day Simple Moving Average. This resulted in a large triangle chart pattern.
Today’s sell-off has successfully confirmed Tuesday’s initial triangle break, causing GBP/AUD to sell-off dramatically down to 15th October Low at 1.8108. Despite Stochastic showing oversold conditions on 4H timeframe and 38.2% Fibonacci level strengthening October’s main support level, both suggesting a temporary breather might be needed, a bearish continuation is the most likely scenario in the coming days and weeks. On a break below 1.8108, traders will immediately target 1.8000/30, where a support trendline from a bearish channel might slow this descent. Even lower, 1.7943 and 1.7820 should represent viable targets for the first half of November.
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Resistance levels are pretty far away at this point, allowing GBP/AUD to move freely without invalidating the downtrend. 1.8240/50 should turn into resistance on a re-test from below; while 1.8300/20 represent a huge cluster of moving averages on 4H. Lacking a huge price action signal off 1.8108, traders will remain bearish on this pair while it trades below these resistance levels. Selling rallies is preferred during these market conditions, as well as selling breaks below support levels.
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Prepared by Alex, Currency Strategist at Capital Trust Markets
