GBP/AUD is a pair that I have been watching quite a bit recently. In fact, I do have a couple written pieces for this website based upon this exact pair. This isn't one that many of you trade would be my suspicion, but the fact is that the pair has reached rather significant levels, and should be paid attention to.
The price action over the last couple days has been fairly interesting, and it should be noted that what originally got me interested in this pair was the bearish flag that you see on the chart. We fell through, bounced off the 1.50 area, retested the bottom of the flag, and then fell through the 1.50 area again during the Thursday session.
This is a classic battle between the bears and the bulls. The 1.50 level is about as significant as you can get on a chart, and as such it is an area that I find very interesting. There could be massive support at this point in time, but I suspect people were going to be more comfortable buying Australian currency than British currency once it's all said and done. After all, Australia is only indirectly affected by Europe, while the British economy is very directly affected by it.
Hammer time
Even though I am very bearish of this pair, I would be remiss not to acknowledge the fact that a hammer did form for the Thursday session. Granted, it's not the prettiest hammer I've ever seen and there is a wick on top of it which is typically a little less desirable.
With all this being said, I think that the hammer actually sets up a pretty decent trigger price for selling. If we can get below the bottom of the hammer, this would show support failing and the Australian dollar gaining ground significantly in this battle. We have seen a steady and progressive grind lower in this pair for months now, and there's very little to suggest that problems in Europe are going away which means to me that people will want to get as far away from it is possible. In other words, this pair going lower makes sense.
I will be adding to an already short position if we can break below the Thursday lows. As for buying, I don't see the opportunity for that until we can break above the 1.54 level.
