GBP/AUD: Downside Bias Intensifies Amid Completion of Head and Shoulders Pattern

Market Overview

On Tuesday, December 3rd, 2024, the GBP/AUD currency pair experienced renewed selling pressure as mixed economic developments emerged from both Australia and the United Kingdom. Australia’s trade deficit expanded for the third consecutive month, exceeding market forecasts and pointing to continued challenges for the nation’s external sector. Despite this adverse data, increased government spending provided a stabilizing influence, allowing the Australian dollar to recover losses from previous sessions and show resilience against most G10 currencies. Conversely, the British pound remained under pressure, weakened by the strength of the US dollar, contributing to a short-term correction in the GBP/AUD exchange rate.

Technical Analysis

The bullish trend in GBP/AUD has lost momentum, with sellers completing a well-defined head and shoulders reversal pattern on the hourly chart—an established signal of a potential shift in market sentiment from bullish to bearish. The European trading session began with a sharp decline, leading to a break below both the ascending trendline and the neckline of the head and shoulders structure. This confluence of technical breaks suggests heightened downside potential.

At the current price of 1.95150, the GBP/AUD pair is poised for further losses as long as sellers maintain control beneath the neckline. Immediate downside targets are positioned at the support levels of 1.95034, 1.94927, and eventually 1.94727. The bearish momentum appears to be gathering strength, with the head and shoulders configuration acting as a robust catalyst for continued declines.

Alternative Scenario

For the bullish scenario to regain validity, buyers would need to push the price decisively above the key resistance at 1.95451. A sustained breakout above this resistance, followed by a move beyond the right shoulder level at 1.95775, could negate the bearish outlook and suggest a possible revival of the preceding uptrend. Such a reversal would require substantial buying momentum, which may depend heavily on favorable economic data releases.

Key Levels

• Resistance Levels: 1.95251, 1.95451, 1.95775
• Support Levels: 1.95034, 1.94927, 1.94727

Key Events to Watch

While Tuesday does not feature any major scheduled events specifically impacting GBP/AUD, market participants are closely monitoring Wednesday’s release of Australia’s economic growth data and the United Kingdom’s Purchasing Managers’ Index (PMI) figures. These data points could significantly affect volatility in the pair, particularly if the results diverge substantially from consensus expectations.

Conclusion

The GBP/AUD pair currently exhibits a downside bias, underpinned by the confirmed head and shoulders pattern. If buyers fail to overcome resistance at 1.95451, further declines towards the outlined support levels are likely.

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