The GBP/AUD pair continued to grind higher during the session on Wednesday, but as you can see pullback slightly from the 2.00 level. This isn’t much of a surprise, because quite frankly “double parity” is about as round of a number as you can get. There will obviously be a lot of profit taking just before you get there. In fact, we ended up forming a shooting star which is a pretty bearish sign. I think a pull back could be coming, but I fully anticipate this market will find buyers below, and therefore I’m not rushing to sell. I believe that it’s only a matter of time before we break out to the upside, but since I don’t have confirmation yet, it’s not worth risking any money on.
200 day moving average
On this chart, I have a 200 day exponential moving average. Those of you who read my work or watch my videos, know that I do not put a lot of faith in moving averages alone, I do recognize that the 200 day EMA is one that a lot of longer-term traders follow. But still has a nice slope to the upside, so I think that there is still a significant amount of money in this market to the upside.
However, if we can break below the bottom of the shooting star, it would not surprise me at all to first test the 1.97 level below, and then possibly even as low as 1.95 or so. Another thing that has caught my attention is that the MACD is much lower now then was the last time we were at this area. It’s not technically divergence, because the last attempt at 2.00 actually broke through it one point during that day, but it is close enough to make me think that perhaps the momentum is slowing down, and a pullback is needed. That would not be a huge surprise, because to break through a psychologically significant number like this, you are going to have to have quite a bit of momentum typically. I am short-term bearish, but believe that we will break out to the upside eventually.
