GBPAUD – the pair from the minimum of September 2017 at the level of 1.6160 for more than half a year moved in the growth channel and from September 2017 to April this year gained 2350p. After establishing the maximum of this year at the level of 1.85, the pair’s quotes began to fall and in mid-May, the price left the growth channel by overcoming its support.
In the graph, we can see the characteristic shape of the Head and Shoulders formation, where the level of the shoulders and head is easy to determine (green rectangles), while the neck lines are a bit harder to find. At first glance, the line connecting the last two local minima (blue dotted) meets the neckline criteria and we can say that H&S is complete and it should be expected that after its defeating declines will gain momentum, and the target will be the further support 1.72 and next 1.6850.
But if we considered that the level parallel to the arm line (1.7975), ie 1.7375 (red dotted line) would be more appropriate, then H&S is still incomplete and currently we are missing ca 140p to reach it and finalize the formation. I am favouring the second version and treating the first line (1) as a local trend line, after its confirmed defeat, I will play on declines to the level of the latter (2), in my opinion, the “real” neckline of the H&S formation.