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GBPAUD: A Tale of Two Wedges

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GBPAUD has been an interesting pair to watch during the month of May. The pair had recently been consolidating inside a broad wedge pattern since mid February before the bears managed to break support on May 5th.

However this proved to be a false break and just three days later the pair found itself trading above wedge resistance. As I always say, a false break on one side of a pattern such as a wedge often leads to a confirmed breakout on the opposite side. The GBPAUD chart is a case in point.

GBPAUD daily chart:

GBPAUD wedge pattern on the daily time frame

Upon retesting former wedge resistance the pair formed a 4 hour bullish pin bar on May 14th. This pin bar led to a 300 pip rally that found resistance 100 pips below the May high. This marked the start of a trend line that has capped all advances since its inception.

We now have two wedges in play. The larger wedge has already been confirmed on a break to the upside, however the smaller wedge looks ready to go any day now. This leaves us in “wait and see” mode for now pending a break of wedge resistance.

Note: I’m only interested in a break to the upside given the broader uptrend and recent bullish breakout of the larger wedge pattern. 

Summary: Wait for a 4 hour close above wedge resistance and then watch for bullish price action on a retest as new support. Key resistance levels can be found at 1.9850 and 2.00.

GBPAUD two wedge patterns on the 4 hour chart

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