FxWirePro: GBP/AUD forms ‘head and shoulder” pattern, slid below neckline but tests resistance at 61.8% Fibos, never buck major downtrend

The major downtrend still remains robust.

On the contrary, in short run the pair is currently taking trendline support at 1.7044 levels and the breach above the resistance at 61.8% (i.e. 1.7431) may expose upwards targets (see weekly charts).

Head and shoulder pattern is traced out on the weekly chart, the bears have pushed below the neckline at around 1.8329 levels, as a result the prices have slid below EMAs and 7EMA crosses below 21EMA which is a trend continuation signal.

Meanwhile, the selling momentum is confirmed by leading oscillators.

Please be noted that the current prices have slipped well below 7 & 21DMAs, so one can very well understand any price jumps would easily be wiped off by selling interests.

Well, on broader perspective, back-to-back "spinning top, gravestone doji & hanging man" evidence bearish effects on monthly charts that are highly bearish in nature as appeared at peaks of rallies.

These bearish patterns are an extremely helpful for traders visually to see where resistance and supply is likely located and you can see their effects on daily price dips.

RSI on both weekly and monthly converge the robust price dips (weekly - below 33 & monthly - below 37), while %D crossover on slow stochastic still maintains even oversold trajectory that is one more signal for bearish momentum to continue in the long run.

While no deviation from monthly MACD, the lagging indicator also confirms the downtrend continuation.

Hence, at spot ref: 1.7420 (while articulating) we advocate pinocchio strategy using above/below binary puts with OTM strikes of 25-30 pips for intraday speculators in an on-going bearish environment that is likely to fetch certain yields as we observe 1D IVs are spiking higher with sky rocketed pace ahead of significant economic event by BoE tomorrow.

When we use such leveraged instruments using ATM strikes that are far more sensitive since higher IV greatly increases their chances of expiring ITM. So, we think no other strategy would be deemed as more efficient in such vigorous bearish environment as the payoffs would be exponential on winning trade.