For those who plan to visit some relatives in UK during the next few weeks or if you just want to trade FX pairs, this may interest you. The following chart represents the evolution of the parity of the Australian Dollar against the British Pound (AUD/GBP).
In our last analysis (Money Morning dated May 26), we were expecting a correction to 0.44 after the currency pair had peaked and started correcting. The level of 0.44 corresponds indeed to the 50% Fibonacci retracement ratio of the bullish trend occurred between October 2008 and May 2009 (between points A and B on the chart)…
But actually the price action did not correct to this level but found some support earlier, just above 0.475. This level corresponds to the first Fibonacci retracement ratio (23.6%, point C).
The currency pair well rebounded from this low point posted in July. It reached a recent high of 0.5108 (point D). This is slightly above the previous high of last May (point B). However the pair has started pulling back downward. Points B and D are likely to build a “double top” pattern that typically generates a trend reversal.
A bearish divergence has appeared on the Commodity Channel Index (CCI). A popular method of analysing the CCI is to look for divergences in which the underlying asset is making new highs while the CCI is failing to surpass its previous highs. This classic divergence is usually followed by a correction in the asset’s price. This is exactly the nature of the current configuration as the price action jumped above 0.51 (point D) while the CCI was actually declining.
A further correction on the price is therefore expected. The immediate objective is the intermediary support validated last month just above 0.4750. The following levels at 0.455 and 0.44 (the two next Fibonacci retracement ratios) are likely to become new targets if the bears take the lead.
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why cant I see todays moneymorning article? I want to link it to a forum