Rise in GBP/USD unlikely to mark bullish reversal
The rise in GBP/USD this morning comes following a nice strong selloff this week. Considering that the Dollar Index is now looking relatively bearish, it would make sense that GBP/USD simultaneously turns higher.
However, I am hesitant given that this does not reflect a similar bottom or top which is typically sparked off by a sharp bearish engulfing candle. This therefore looks more like a short term retracement that will proceed another leg lower, towards the $1.5191-$1.517 support zone.
Possible EUR/GBP double top being formed
The recent recovery in EUR/GBP brings it back into the range that has been respected for around a month now. Largely this market has been topping off between £0.734 and £0.74, the former of which has now been reached.
There is not a complete consistency with when it turns lower again and thus it’s a case of watching price action within this area. The failure to create a new higher high this morning is a possible initial warning sign of a selloff. I would need to see a closed candle below £0.7322 to gain confidence of a move lower for the pair.
Thus a close below £0.7322 would bring a completed double top and points towards a move to £0.7297 (double top projection) and £0.7285 (21 Sept resistance). A failure to break lower would make this look simply like consolidation for another move higher.
AUD/USD continues to trend lower
AUD/USD continues to trend lower in a very clear and consistent manner. This morning has seen another leg lower, which is likely to soon turn into another retracement higher back towards the 20-hour simple moving average.
Therefore, whilst I am bearish given the clear trend in play, I believe we have seen the majority of this latest step lower and would not see this as a good entry. The likeliness is that we will see another move higher soon and thus I expect a retracement within today’s European session to move back to the 20-hour SMA before selling off once more. Ultimately the next major level of support to look out for is $0.6908.