The GBP/AUD pair tried to break out during the course of the session on Friday, breaking above the 2.07 level and testing the 2.08 level. Ultimately though, we ended up forming a bit of shooting star so therefore I feel that the market is going to pull back a little bit as perhaps we need to still build up a bit of momentum to continue going higher. As you can see on the chart, I have drawn a yellow rectangle, which I believe represents consolidation. All I am waiting for us to see this market pullback a little bit and show signs of support somewhere in that range to start buying.
Having said that, if we can break the top of the shooting star, that is also a very bullish sign. If we can get above there, we should then head to the 2.10 level, and now that the pair is comfortably above the 2.0000 handle, a lot of the psychological resistance is probably gone at this point.
Buying on dips
I believe that buying on dips going forward will be the way to go, as the market should ultimately go much higher. The British pound is fairly strong against most currencies, and the Australian dollar of course is very soft worldwide. With that, it makes perfect sense that we should continue to go much higher. There isn’t anywhere near as much of an interest-rate differential is are used to be, so quite frankly there isn’t any reason to think that the pair will do anything but go higher. This is especially true considering that the British pound is likely to get a bit of a boost from interest-rate hikes much sooner than the Australian dollar.
With this, we believe that the absolute “floor” in this market is found that the 2.0000 handle, and as a result as long as we can stay above there I have no interest whatsoever in selling this market, simply because of the psychological significance of 2.0000 on a currency pair.
