- The GBP/AUD has fallen a bit against the Australian dollar during the day but then turned around to show signs of life again.
- By doing so, it looks like the market will try to break back above the psychologically important 1.75 level. If we can break above there, then it’s likely that the market will continue to recover, perhaps trying to get to the 200-Day EMA which is currently right around the 1.7750 area.
- We also have the 50-Day EMA in that area, so I think there are multiple reasons to believe that might be a target if we do take off to the upside.
On the other hand, if we break down below the hammer from the previous session, then it’s likely that we could go down to the 1.70 level. We are at a major inflection point, so it does make a certain amount of sense that we have a bigger move sooner or later. Keep in mind that the RBA is expected to be tight with its monetary policy, but at the same time, the Bank of England has high inflation numbers. It’s also worth noting that from a technical standpoint, when you look to the left, there is a huge cluster in this area, so I think we are trying to find enough liquidity to turn this market around.
Noise Ahead
The only thing I think you can count on is a lot of noisy behavior, but once we clear that 1.75 level to the upside, I am more than willing to get long. On the other hand, we can break down below the bottom of the hammer, and I have no issue shorting at that point. Ultimately, the market will tell you which way it wants to go, it’s your job to follow whatever direction it picks. I will wait for a daily close to getting involved because I believe that there is a high probability of noisy behavior, so you need to be cautious about trying to jump the gun. With that in mind, it’s just a matter of waiting for the signal and following it.
This is going to be an interesting pair because both the Australian dollar in the British pound has been relatively strong against the greenback, so it does make a certain amount of sense that we have to settle this decision as to which one is stronger sooner or later.
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