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Technical Analysis – GBPAUD just below the 15-month high, correction likely
May 3, 2023 11:28 amVideo
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GBPAUD is edging higher today but it remains a tad below the April 28, 2023 high of 1.9034. This is the highest print for almost 15 months, with the pair also recording an impressive 18% increase since the September 26, 2022 low of 1.5937. The recent upleg since mid-February has been very aggressive, which means that a correction could clearly be on the cards.
This outcome appears to be supported by the stochastic oscillator. This indicator has broken below its moving average and its overbought area; a potentially strong bearish message. In addition, a bearish divergence has been developing as the higher highs in GBPAUD have been met with lower highs in the stochastic. On the other hand, the bears could take some solace from the RSI remaining comfortably above the 50-threshold, but not from the Average Directional Movement Index (ADX) which is still pointing to a (weakening) bullish trend.
Should the GBPAUD bulls keep up the pressure, they would quickly retest the April 28, 2023 high of 1.9034, before coming up against the busier 1.9183-1.9220 area. This is populated by the January 14, 2014 and January 28, 2022 highs respectively. Even higher, the December 16, 2019 high of 1.9521 could prove tougher to crack.
If the bears muster the courage to stage a comeback, they would initially face both the October 11, 2018 high at 1.8724 and February 21, 2023 upward sloping trendline respectively. Lower, the 1.8517 level set by the 78.6% Fibonacci retracement of the January 29, 2022 – September 26, 2022 downtrend could trouble the bears, ahead of the key 1.8320-1.8378 area.
To sum up, GBPAUD bulls’ confidence remains sky-high, but the stochastic is ready to spoil their party and allow the bears to recoup some of their recent losses.
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