GBPAUD Forex Correction Setup – Nov 7, 2014

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GBPAUD recently made a strong upside break past resistance at the 1.8400 major psychological level and may be due for a forex correction. The Fib levels based on the latest swing low and high on the 1-hour chart show that the 50%-38.2% area lines up with the 1.8350-1.8400 potential support zone.

A bounce from this region could lead to a rally back to the pair’s previous highs near the 1.8700 major psychological mark while a selloff could still find a floor at the 61.8% Fib or 1.8300 handle for a larger forex correction. However, a break below the Fib levels would indicate that a longer-term selloff is taking place.

Forex Correction Levels

Strong buying momentum might lead to a break past the previous highs and the creation of new ones, possibly until the 1.8900 mark. There are no major event catalysts left for a strong forex correction move until the end of the week though.

Fundamental factors suggest that the bias is a sideways move for the time being, as both BOE and RBA gave off dovish biases in their recent rate statements. While traders are still waiting for the BOE minutes to be released in a couple of weeks to gauge whether the pound forex correction might carry on or end earlier. As for the RBA, Governor Stevens simply reiterated that the currency is still overvalued but refrained from announcing additional policy measures as well.

Data from both economies have been shaky lately, with the UK printing a disappointing services PMI reading for October. In Australia, while the retail sales has been strongly supported by seasonal factors, the trade balance turned out to be a disappointment. The larger deficit was spurred by falling commodity prices and a weaker Australian dollar, which boosted import activity.

With that, the GBPAUD forex correction could still go either way, with the potential for consolidation as the central banks maintain their current biases.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.