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Today’s Trading Edge: GBP/AUD crashes after Bearish Butterfly and Double-Top Patterns form

 

WWM GBPAUD June 3 2015

The British pound collapsed against all of its major trading partners after Markit Economics reported the weakest rise in services output in 2015.  UK Services PMI printed a 56.5 reading, significantly lower than the forecast of 59.2.  GBP/AUD dropped nearly 100 pips 1.9603 before stabilizing back towards the 1.9680 region. 

The GBP/AUD daily chart shows both the formation of a potential double-top and bearish butterfly pattern.  Point D of the butterfly pattern is targeted by the 161.8% Fibonacci expansion level of both the X to A move and the B to C leg.  If the bearish reversal continues, key support will come from the 50-day SMA which is currently trading at the 1.9464 level.  Deeper support may come from the 1.9200 handle.    

If the currency pair is able to surge above last week’s high of 2.0055, further upside may target the 2.0350 level.    

The trade: Sell GBP/AUD at 1.9675, with a stop loss at 1.9775 and take profit at 1.9275.  The risk/reward ratio is 1:4

Edward J. Moya

Senior Market Strategist

WorldWideMarkets Online Trading

Forex Trading Demo
 


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