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On Tuesday, I wrote about a possible GBPAUD reversal.
The weekly bearish engulfing candle from mid-December looked ominous, especially given the multi-year highs that preceded it.
Additionally, the price structure on the daily time frame hinted at a possible head and shoulders reversal.
I was able to get short with a small starter position at 1.9100, which I announced on the membership site at the time of entry.
That position will remain relatively small until I see follow through.
More specifically, I want to see GBPAUD sellers take out 1.8900 and 1.8700 over the coming days.
The 1.8900 horizontal level has been a factor since last November.
As for 1.8700, that’s the approximate location of the neckline that belongs to the head and shoulders pattern I mentioned on Tuesday.
Just keep in mind that the neckline could be lower, perhaps closer to 1.8680 if GBPAUD sellers get impatient next week.
Between those two prices, 1.8700 is more significant, in my opinion.
That’s because a daily close below it would confirm the head and shoulders reversal.
It would also open the door to the pattern’s 900 pip measured objective, which is currently down near 1.7800.
Of course, that objective could fluctuate depending on when (and if) the GBPAUD confirms the reversal structure.
There are also no guarantees that it will continue to reverse.
So far, my short from 1.9100 is looking good, but things can change in a hurry.
I’ll stick with my bearish outlook as long as the pair continues to carve what could be a 900 pip head and shoulders pattern.
But until GBPAUD sellers clear that 1.8700 region, it’s all a bit too speculative for me to add any real size here.