The GBPAUD is a famous pair for strong technical plays. Both the GBP and AUD have higher interest rates historically and are seen as risk pairs. Because they have similar dynamics, the GBPAUD cross often ranges nicely.
When you take the ruler tool to the chart, you can see how this pair favors big coordinated moves.
Going back to this very week in 2011, GBPAUD started the first of three 1,400 pip plus moves. These moves display the ability of this pair to take off in one direction until the underlying factors of the pair switch course. Luckily for you, the underlying factors are played out and can be interpreted on the chart in price action.
Triangle Forming
If we turn our attention to the right of the chart, which is the only part of the chart we can enter a trade on, you’ll notice a triangle forming. Specifically, this is an ascending triangle because of the rising floor. Triangles allow us to analyze congested price action so that we can place a higher probability entry.
What’s nice about trading triangles is that our risk is clearly defined based on prior price action.
Looking below we can see the levels that we want to focus on should the triangle continue to play course.
Most notably though is the potential trade set up with a confluence of indicators. Anytime we have a union of indicators pointing out a trade idea, it is seen as a higher probability trade. Granted, there are no guarantees so we must always have our risk management set up properly.
Identifying Important Levels
In addition to the price action ascending triangle, we see the 200 period moving average and pivot levels to help up mange the risk on the trade.
The 200 Day Moving Average is used as a line in the sand for most traders. For you, this would mean that the market would not encourage you to buy if price is below the 200 Day Moving Average.
On the chart above you can see the 200 Day Moving Average dividing price down the middle. We can look to trade back to the top of the triangle once price has crossed through and closed above the moving average. These are strong technical levels and we do not want to risk the trade until price is above the 200 Day Moving Average.
Price is currently below the 200 Day Moving Average which sits at 1.5361. You can use an entry order to trigger your trade once price hits that level.
We also have Pivot Levels that price has respected in light of the triangle. If you’re unfamiliar with monthly Pivot Levels, they are drawn from the first to the last of the current month based on last month’s price action. Because so many traders look to Pivot Levels for trading they can be predictive in nature as you can see sellers back off and buyers come in off the Monthly Pivot Levels. Many traders combine Pivot Levels with candlestick patterns to help them identify entries.