GBPAUD has been in consolidation mode since the post-Brexit selloff that caused prices to plunge 2,600 pips in just 12 trading days. The consolidation, which began with the July 11th multi-year low, has carved out an ascending channel on the intraday charts.
But before we get to that, let’s take a look at where the pair sits on the daily chart.
As you can see, today’s price action is in the process of forming a bearish outside day. Depending on where the session closes, this alone could be an indication of a move lower next week.
However, if you read yesterday’s commentary on AUDUSD (which made its intraday break earlier today) you know that I’m bearish the Australian dollar.
This sentiment creates a bit of a dilemma because as you may well know, AUDUSD and GBPAUD share an inverse correlation at the moment. So in a way, I’m contradicting myself if I hold a bearish view on both pairs simultaneously.
Having said that, the correlation between assets are in a constant state of flux in the same way an asset’s price is ever-changing. So just because the two are inversely correlated this week doesn’t mean they will be next week or the week after.
Whether the two can move in tandem next week likely depends on what the British pound does. But as of now, it’s unclear whether the structure below will indeed trigger a continuation of the prevailing trend.
Perhaps we’ll know more by Monday or Tuesday of next week.
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