Daily Price Action
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GBPAUD: Keep an Eye on 1.7940

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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

Click here to get access to the same charts I use.

Last week I mentioned how the EURAUD might be setting up for a significant drop. The potential head and shoulders pattern is far from confirmed, but it does present a highly favorable idea to keep an eye on as things unfold.

Not surprisingly, the GBPAUD is in the same boat. Since December of last year, the pound cross has carved what appears to be a 1,200 pip topping pattern.

It’s particularly appealing to me considering the pair is coming off a failed break of ascending channel resistance in March.

Here’s a view of the price action since the 2016 low:

GBPAUD ascending channel

On March 19th, the GBPAUD closed the day above channel resistance near the 1.8100 handle. After more than four weeks of trading above the level, buyers lost the battle on May 2nd, and the pair closed back inside the ascending channel.

The chart above is an excellent example of why I don’t buy upside breaks of ascending levels. They’re considered “weak” breakouts and end up false breaking more often than not.

Now, the 1.7940 level is the one to watch. It has directed price action since the December 2017 high and is also the 50% retracement when measuring from the current 2018 high in March to the June low.

You can see how this level has more recently served as resistance since the June 19 session. However, I’m not interested in shorting the pair just yet. The constant bullish pressure being applied to 1.7940 suggests a wait-and-see approach for now.

If the pair forms bearish price action from 1.7940, I will consider a short entry. Alternatively, I’ll be watching for an intraday spike up to 1.8080.

In order for sellers to confirm the head and shoulders pattern I mentioned above, they will need to secure a daily close below the neckline near 1.7480. Such a break would expose the objective at 1.6160, just don’t forget about ascending channel support as shown in the chart above.

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GBPAUD head and shoulders pattern

Leave a Comment:

8 comments
Lazlo says

That is also the 61.8% fib level, btw.

Been waiting for a proper sell signal here.

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Khitish Dash says

Thank You sir.Ur analysis in price Action are very Effective.I am a student so i am not unable to join your Membership Plan but one day i ll definitely join.Thanks

Reply
    Adri says

    What’s included in the membership plan?

    Reply
Ferdinand Aviator says

Fine suggestion

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Bradley says

how do u know that was a false break ?

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    Luke says

    Because price traded above ascending channel resistance for some time but failed to continue higher and eventually fell back into the channel. Making it a false break of ascending channel resistance.

    Reply
Roy says

Nice work coach. Been watching this for weeks.

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Oswald says

thank you Justin.
you are helping me a lot.
My question. what examples of bearish signal price action that i have to use confidently for me to enter a position.

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