GBP/AUD stretched and nearing known reversal area

GBP/AUD is rarely as overbought as it is right now. And when it has been this overbought in the recent past, it’s usually coincided with a near-term top. It’s also fast approaching 1.9500, a level that has been akin to poison for longs throughout 2024. Combined, it has me on alert for a potential topping signal, providing the catalyst to establish shorts with favourable risk-reward.

It’s clear the bulls are in control right now. But should we see a topping pattern – be it a bearish pin, tombstone doji or similar – the tale of the recent tape suggests getting short could prove fruitful. But wait for the appropriate signal before doing so.

Those considering taking on the trade could place a stop above 1.9570 for protection. Potential targets include 1.93493, the former downtrend just below 1.9300 or 1.9250.

DS