CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

GBP AUD What Would Yogi Do

Article By: ,  Financial Analyst
September 23, 2015 3:04 PM

The inimitable New York Yankees catcher, Yogi Berra, passed away today. Beyond his impressive baseball record, including 10 World Series rings and three Most Valuable Player (MVP) awards, Berra was also known for his humorous one-liners, affectionately called “Yogisms.” In honor of Berra’s memory, we’d like to analyze GBP/AUD through a series of Yogisms:

“Nobody goes there anymore. It’s too crowded”

Currency pairs tend to move in self-reinforcing trends, attracting more and more traders to the established trend until there’s no one left to buy or sell. Once a trend reaches the point when it’s “too crowded” it inevitably reverses (people stop “going there”).

In the case of GBP/AUD, it’s hard to argue against the recent bullish surge; to wit, the pair is up nearly 5,000 pips from where it was trading this time last year, and rates have tacked on 2,700 pips in just over the last four months alone. With the prolonged uptrend seemingly growing a bit long in the tooth, it’s certainly worth pondering whether we may be at an inflection point.

“When you come to a fork in the road … take it.”

GBP/AUD bulls have no doubt reached a fork in the road. The established uptrend remains intact, but the pair has recently struggled to break above the 2.21 level, which represents the long-term 61.8% Fibonacci retracement of the entire 2008-2013 drop. Unfortunately, “take the fork in the road” isn’t particularly actionable advice for traders, which is why Yogi advised that…

“You can observe a lot by watching.”

Like many Yogisms, this quote toes the line between an obvious tautology and brilliant insight. When it comes to GBP/AUD, the secondary indicators reveal a mixed view of the health of the current uptrend. The MACD indicator has rolled over and is now at its lowest level in about four months, though the RSI indicator is still holding above the key 45 level that has provided support throughout the entire uptrend. If this key level breaks, it would signal a likely end to the uptrend, but as long as it holds, the near-term bias will remain neutral below 2.21 resistance.

“It ain’t over ’til it’s over.”

Yogi’s most famous quote is particularly applicable in this case. While there are some strong signs that the GBP/AUD uptrend is weaker than it’s been at any point since Q1, there’s a reason that “the trend is your friend” is one of the most famous trading quotes. Until traders see GBP/AUD break below bullish trend line support and 2.1450, we’re inclined to give the established uptrend the benefit of the doubt.

Source: City Index

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024