“INDICATOR OF THE DAY” - DOUBLE BOTTOM
The recent moves on the cross have been quite aggressive and given the nature of the longer-term pullback and fresh multi-year lows earlier this year, we would not at all be surprised to see some form of a corrective rally. Price action over the past several days could now be confirming with the formation of a potential double bottom.
Gbp/Aud: A double bottom usually occurs once a significant decline in the market has stalled out. Setbacks will initially find some support and then rally to a nearby high (called the “neckline”), before dropping back to the previous low and once again stalling at or near the same support level. From here, another rally ensues, with the break above the nearby high or neckline, finally triggering a massive round of buying and opening gains that are projected to be approximately equal in the size of the move from the neckline to the double bottom lows. Looking at the chart above, we can see the formation of a double bottom on the cross with the clear break above the 2.0610 neckline to likely open a push back towards 2.1300 in the near-term.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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