GBPAUD at most important resistance since 2020

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The GBP/AUD pair shows a notable pattern on the daily chart, displaying a clear uptrend that has persisted since July 2024, characterized by rising lows but encountering resistance at the 2.000 level. Recently, the price approached 1.9967, a significant resistance level not seen since 2020. This level is pivotal, not just as a historical high, but also as a key psychological barrier near the round number of 2.000. Following this resistance testing, the price has begun to exhibit signs of weakness, indicating a potential reversal or at least a short-term correction.

Current Market Context

The bullish trend has been backed by a distinct ascending trendline connecting the key lows. However, as the price neared the 1.9967 resistance, candles with long upper shadows emerged, signaling rising selling pressure.

Potential Sell Opportunity: Close Below 1.9735

A close below 1.9735 would result in a Bearish Engulfing pattern, where a bearish candle completely covers the previous bullish one, indicating a shift in market sentiment toward sellers. In this context, closing below 1.9735 would validate this pattern and support a potential sell-off.

Characteristics of the Potential Sell Trade:

• Entry Point: Approximately 1.9730 (upon a close below 1.9735).
  
• Stop Loss: 2.0010, above the recent high, to guard against false breakouts.
  
• First Target: 1.9350 (380 pips away), aligning with significant support from November, where the price faced strong rejection previously.
  
• Second Target: 1.9150 (580 pips away), corresponding to an even stronger support level, reinforced by the long-term ascending trendline.
  

Risk-Reward Ratio:

• Risk: 280 pips (from 1.9735 to the stop at 2.0010).
  
• Reward:
  
• First Target: 380 pips (Risk-Reward Ratio: 1.35).
  
• Second Target: 585 pips (Risk-Reward Ratio: 1.52).
  

This scenario presents an attractive opportunity for traders seeking a short-term trend reversal.

Scenario: Breakout of 2.000 Resistance

Conversely, if the price breaks and closes above 2.000, this historical resistance would be invalidated, potentially allowing the uptrend to continue. In this case:

• Entry: Close above 2.000.
  
• Stop Loss: 1.9900, positioned below the broken resistance to protect against retracements.
  
• First Target: 2.0100 (90 pips from the entry), a significant psychological level likely to attract market interest.
  
• Second Target: 2.0250 (240 pips from the entry).
  

Signals Against Selling:

• A breakout candle with increasing volume above 2.000.
  
• Sustained closes above the resistance, indicating buying momentum.
  

In this scenario, the bullish structure would resume, with buyers regaining control.

Summary

The GBP/AUD pair is at a critical juncture. A Bearish Engulfing pattern following a close below 1.9735 could present a viable sell opportunity, supported by clear targets and a favorable risk-reward ratio. Conversely, a break above 2.000 could pave the way for new highs, sustaining the uptrend. Traders should closely observe price movements in the upcoming sessions to determine the likely outcome.

Disclaimer:

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