The GBPAUD cross is developing a corrective movement of its last bullish cycle. The corrective move has pushed it to fall more than 1,000 pips from May to early of July. In this post, we will review what to expect for the following days of this cross.
The big picture
The GBPAUD cross is moving in a rising sequence of higher highs and higher lows since the October 2016 low. The Elliott Wave structure could correspond to a leading diagonal. This pattern encourages us to conjecture that, long-term, GBPAUD could start a rally taking it to go beyond the psychological barrier of 1.90. The long-term invalidation level is located at 1.72088.
Our short-term outlook
Short-term, we foresee that GBPAUD could make a new low between 1.78230 and 1.76595 from where it could start a bounce. In the 3-hour chart, we observe that the RSI oscillator still shows signs of bearish bias. The absence of bullish divergences gives us a clue that the bearish bias prevails.
The intersection between the bearish channel and the base-line of the leading diagonal is the potential exhaustion area of the corrective cycle. In the region around 1.78230, the price would meet the minimum requirement to complete the bearish correction. In the same way, the movement could be extended up to 1.76595, the level of compliance of the wave equality condition. If the price extends its drops below 1.72088, we would be in the case of a deeper correction and the bullish scenario would be invalidated. The level of invalidation of the bearish cycle is located at 1.81717.
Remember that the price is not forced to move as our outlook proposes. The chart released corresponds to an Elliott Wave Analysis application.