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GBPAUD: A Little Patience Could Go a Long Way

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One of the harder aspects of trading is having the patience necessary to wait days or even weeks for a particular trade idea to fully materialize. A great example is that of the recent price action on GBPAUD following last week’s Brexit vote.

Any time a currency pair moves 1,600 pips in a single session, all of the “greed” receptors in the brain come alive while imagining all of the money that you could have made. Sure, a ton of money was lost too, but our brains don’t like to think about that.

Then the fear of missing out sets in – what if you miss the next 1,600-pip move?

But to profit consistently, especially in a market this volatile, greed and fear need to pipe down. These emotions have no business being in our head because everything we do is cold and calculated and is certainly not based on emotional triggers.

As for GBPAUD, a little patience could go a long way in allowing the pair to produce an opportunity worth the associated risk.

But three things need to happen first:

  1. More time for the markets to digest last week’s shake-up
  2. A reversion to the mean (10 and 20 EMAs)
  3. Retest of former support as new resistance

The new resistance level in question is 1.8350, which is a key pivot dating back to 2009 and is also the 50% Fibonacci retracement from the 2013 low at 1.4380 to the 2015 high at 2.2370.

With the right bearish signal, a retest of this area could trigger the next leg down toward the 1.7430 support level. This area played a critical role as resistance in the second half of 2013 and later served as support in 2014. It’s also the 61.8 Fibonacci level when measuring from the two points mentioned above.

In summary, GBPAUD needs a bit more time to digest the recent volatility, but any further recovery from current levels could falter at the 1.8350 handle.

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GBPAUD support and resistance on the weekly chart

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6 comments
Dark says

Keeping the down bias, could 1.7730 became a support?

Reply
    Justin Bennett says

    Yes, absolutely.

    Reply
Mustapha Adeniji says

nice set up sir, the patient dog eat the fattest bone

Reply
Earl says

true story Justin,
been watching this pair like a hawk..’

Quick question please,
do you strictly choose and manage your trades on the daily chart alone? or you sometimes go down to the H4 chart to check for a signal on a daily key level?

if your answer is yes, what would you do if price retraces back to a key level and perfectly touches the 10ema & 20ema mean on the 4Hour chart but price is still a bit extended from the mean on the Daily chart?

would you take the trade if you get a good price action signal on the H4 chart regardless or you would wait for a mean reversion on the daily chart?

would appreciate an answer, no matter how short….

Regards,
Earl..

btw Adeniji, Greetings from a Nigerian Brother.

Reply
Harald Cermak says

As always and everyday your comments and trading suggestions are one of the very best which people can find in the net for no money too. I really appreciate your interesting analyses and ideas every day. Thank you so much for getting on.
Greetz from vienna
Harald

Reply
    Justin Bennett says

    Harald, you’re very welcome. I always enjoy writing the content for you guys. Thanks for stopping by.

    PS: Vienna is one of my favorite cities to visit.

    Reply
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