Continuation Trades in EURAUD and GBPAUD

EURAUD and GBPAUD have been in quite a wide range for a while (since Jan and July respectively). This range essentially consists of risk on and risk off state of equity markets. Risk on - current state of equities - means AUD is the winner. For example, one way to confirm whether risk on is about to begin is to look at EURAUD and GBPAUD besides AUDUSD, USDCAD and DAX30.

Prior to this range both EUR and GBP have been depreciating vs AUD and these long ranges (Rectangles in Dow Theory language) are either Consolidation and Reversal patterns. The problem is we do not know for sure yet which but I will assume it is Consolidation till proven wrong. When EURAUD closes above 1.4212 and GBPAUD closes above 1.6275 on a weekly basis, then there is an evidence of a major trend reversal.  On the other hand, a weekly close below 1.2971 and 1.4899 respectively will confirm continuation of the previous downtrend.

The picture gets a bit clearer when we look at daily charts. I drew symmetrical triangle on EURAUD and the pair has opened below the triangle. Bearish trade for the pair?

I also drew an uptrendline (approx 1.51) on GBPAUD but the pair is not near it yet. If this uptrendline does not hold, then I will be looking at 1.50 and 1.48 as initial downside targets. Below 1.48, downside should accelerate.The width of the Rectangle is 1200pips. Possible target is 1.39.

4h charts below show what looks like bearish Descending Triangle but the correct interpretation would be a pennant, short term consolidation pattern of half-mast type. Minimum target is the width of the pennant but normally we should expect a move equivalent to pennant's mast starting from the break out of previous pattern.

EURAUD target is approximately 1.2470 (1.3680-1.3070=610pips). 1.3070 is just below the neckline of the H&S top that you cna clearly see.

Target for GBPAUD is approximately 1.45 (1.52 less 700 pips). This pair also broke down from ascending H&S.

Now, all what i wrote here regarding what looks like a Pennant may just turn out to be rubbish if the price action evolves into something else, possibly a small Rectangle or who knows what. It looks unlikely but I may even have to play on the long side if the pairs break to the upside instead of following the script.

But if the analysis is correct then the implication for equities is that we should see further upside. In terms of confirmation, AUDUSD is in a bullish flag (clear range on 4h chart) and a daily close above 1.0290 should give that confirmation. USDCAD is being nudged downwards by its downtrendline and as long as that is the case, bullish stance is warranted but on the way down it has to overcome 1.0074

 So, we will wait and see but the resolution for these 2 pairs and for AUDUSD for that matter seems very close.

Good luck.