Cup With a Handle In GBP/AUD

By: Mike Kulej

The GBP/AUD is still dominated by a downtrend. On the intermediate term chart, the most visible feature is the sharp selloff in August and September, which pushed this pair from 1.7560 down to 1.6440. However, this may be ending soon.

Over past few days, the GBP/AUD has been developing a cup with a handle reversal pattern. It is characterized by a rounded bottom, followed by a much smaller pull back with the price returning to the top of the formation. In this case, it is a 1.6740 level. For the cup with a handle to be completed, the price must move this level. At the moment it is not far off, closing last week around 1.6690. If this happens, the reversal pattern will be confirmed, suggesting a move to the main down trendline, which currently is about 500 pips away.

There is another resistance in the way, a minor high at 1.6900, where some reaction could take place. On the other hand, a smoothed out trend using a Three Line Break chart has already been broken, which lends additional credibility to the developing cup with a handle. However, it must be completed first and this should be decided very soon.