GBP/AUD traded lower on Wednesday after it hit resistance near 1.8423. On Tuesday, the rate emerged above the downside resistance line drawn from the high of Sept. 20, and although it pulled back today, it stayed above that line.
That said, we are reluctant to call for a bullish reversal yet. We prefer to wait for a break above 1.8423, marked by the high of Nov. 3. Thus, for now, we will stay neutral.
If we do see a rebound and a break above 1.8423, a forthcoming higher high will be confirmed and perhaps pave the way towards the high of Oct. 22, at 1.8500, or the high of Oct. 19, at 1.8530. If neither barrier can stop the advance, we may see extensions towards the peak of Oct. 18, at 1.8612.
Shifting attention to our short-term oscillators, we see that the RSI turned down after hitting resistance near its 70 line, while the MACD, although above both it's zero and trigger lines, shows signs of topping as well.
Both indicators detect upside speed, but they have turned down. So, we will wait for a break above 1.8423 before considering the possibility of a bullish reversal.
The move that could trigger the resumption of the prevailing downtrend may be a return below the downside line taken from the high of Sept. 20, or even better, a dip below yesterday's low, at 1.8267.
This could initially pave the way towards Monday's low of 1.8190, or the low of Nov. 2, at 1.8125. If the bears are unwilling to stop there either, we could experience declines towards the 1.8060 zone, marked by the inside swing high of May 4.
