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GBP/AUD Bearish Breakout.

GBP/AUD Bearish Breakout.

Walker England, Forex Trading Instructor

Market Condition: GBP/AUD Bearish Breakout

Target 1: 2-x ATR Extension (1.9711)

Target 2: 4-x ATR Extension (1.9251)

Invalidation: 1-X ATR over Resistance (2.0401)

GBPAUD Daily Chart

(Created using Marketscope 2.0 Charts)

The GBP/AUD has resumed its downtrend after testing trendline resistance found near Mondays high, at a price of 2.0979. This turn can allow trend traders an opportunity to join the trend on a breakout and the creation of a lower low. The current swing low for the pair is found at the December 2015 low a price of 2.0176. With entry’s set below this point, traders can prepare potential breakout targets using ATR, which currently reads at 230. This sets a 2-x ATR price target near 1.9711. Longer-term targets using a 4-x ATR can be set at 1.9251

In the event that prices fail to decline and move back through trendline resistance, any bearish breakouts would be at least temporarily invalidated. In this scenario, entry orders may be deleted and traders may begin looking for other opportunities. Conversely, in the event of a breakout to a new low, a move in price back above resistance (previous support) may invalidate this signal. Traders using ATR may elect to set stops near 2.0401 using a 1-x ATR extension. When coupled with the targets mentioned above, this would allow traders to look for a minimum 1:2 Risk/Reward ratio.

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