Two bearish trade setups on the GBP/USD and the EUR/AUD. Let’s dig into the charts.
GBPUSD Three Drives PRZ Was Hit.
GBP/USD hit the PRZ for a three-drives pattern at 1.3140. Although I prefer the symmetry of the 2nd and the 3rd waves as explained in the how to trade the three drives pattern. The trade setup remains strongly valid and supported by more than one bearish signal.
The price action has shown signs of valid resistance around that area, as it formed a shooting star bearish candle, followed by a hanging man candle, indicating hesitation and a possible reversal area. That happens while RSI moves above 70.
If we look left, the 1.3200 (just 60-pips above the PRZ) has formed a clear resistance area, rejecting the price sharply lower towards the 1.1410 low recorded in March.
Having that in mind I am looking for a short-term downside reversal. Targeting a retest of wave two high at 1.2813.
EURAUD Sideways Range Trade Setup
EUR/AUD has been trading in a sideways range for the past couple of months. Recently, the price has hit the top of the range, while RSI(Relative Strength Index) hit the overbought area.
The 200-day simple moving average is also near the top of the range, giving further weight to the range’s ceiling.
Multiple bearish reversal candles formed when the range resistance area was tested. Meanwhile, RSI signaled a slight bearish divergence.
The most recent bullish wave may have taken the shape of a short-term rising wedge price action pattern. And possibly it’s being broken at this moment.
In this context, a bearish trade setup is present, with a first target near the middle of the range around 1.6350, and a second target at the bottom area of the range(shaded in light red). Note that the closer the entry to 1.6550 the better the risk-reward of this trade.