The GBP/AUD has been hovering at support for numerous days, indicating that another bullish bounce could be in stall very soon.
This analysis will look at clues within the recent price structure in order to provide a potential trade setup.
The GBP/AUD has completed a very clean bearish 5 wave impulse (blue). Price has been corrective since the late December low. The internal wave structure of the correction is making a good case for another bullish bounce (blue and turqouise wave counts) that could target 1.75.
The fact that price has been unable to break the December low for an extended period of time and the choppy nature of the price-action suggest that not enough sellers are available to drive price lower yet.
The alternative wave scenario would be that the high of blue wave ‘w’ may have already completed the bullish correction. This would make turquoise wave ‘a’ into wave ‘1’ of the next bearish impulse already and turqouise wave ‘b’ into wave ‘2’. However I do not favor this scenario because AUD/USD, who is the main driver of AUD currency flows, is also still due for a correction. Thus, the wave count shown in the above chart is the more probable one in my opinion.
Watch out for a strong bullish bounce at the POC zone of 1.7150 – 1.7185. Price may already bounce at the previous lows of 1.7212 but be mindful that turquoise wave ‘c’ could temporarily break this support and dip lower to the stronger POC zone just below.
Very aggressive traders could consider placing buy limit orders at the POC zone with a more generous stop loss.
The safer alternative is to wait for the first upwards thrust to complete, then wait for a pull back towards the 21EMA, and only then trade the second bullish thrust (please refer to the blue price prediction lines in the chart above)
All the best along your trading journey…
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