Following a 3,000 pip rally between May and August, GBPAUD spent the better part of three months consolidating above the 2.00 handle.
However, yesterday’s selloff confirmed the reversal pattern I mentioned over the weekend. The price action since August appears to be a head and shoulders pattern with a neckline near 2.0740, a level that was broken with conviction during yesterday’s session.
From here traders can watch for continued weakness, but not before a retest of former support as new resistance. Not only will this allow for a more favorable entry, it will help to shake out any weak hands prior the next leg down.
Only a daily close back above the neckline would negate the bearish bias. The first key support level comes in just above the 2.00 handle at 2.0027, which corresponds to the February swing high as well as multiple highs between May and June.
The measured objective for the pattern is 1.9300, a level that has quite a bit of confluence based on the price action between December of 2014 and May of 2015.