GBP/AUD had been in a tumbling mode this week, falling below the psychological 1.8000 zone for the first time since February. However, the slide was stopped near 1.7855 yesterday, and today, the rate rebounded somewhat. Although it could continue recovering for a while more, the price structure still suggests a short-term downtrend below the downside resistance line drawn from the peak of May 6th. Thus, we will stick to our guns that the outlook of this pair is negative.
As we already noted, the recovery may continue for a while more, perhaps for the rate to challenge the psychological zone of 1.8000 as a resistance this time. But if the bears decide to jump in from near that zone, then we may see another slide and another test near the 1.7855 hurdle. If that level fails to halt the slide, its break would confirm a forthcoming lower low and may set the stage for extensions towards the 1.7640 area, marked by the low of January 15th.
Taking a look at our short-term oscillators, we see that the RSI rebounded from slightly below 30, crossed above that level and now points up. The MACD, although below both its zero and trigger lines, shows signs that it could start bottoming as well. These indicators are in support of our view for some further recovery, at least towards 1.8000, before and if the bears decide to take charge again.
In order to start examining the case of a larger upside correction though, we would like to see a clear break above 1.8040. Such a move could encourage the bulls to put Monday’s peak, at around 1.8170, on their radars, the break of which may extend the advance towards the downside resistance line drawn from the peak of May 6th, or the 1.8235 level, defined by the high of June 26th.
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