- Summary:
- AUD/USD head and shoulders and bearish RSI divergence point to more weakness. The first line of defence is 0.70, should the pair break the neckline.
The AUD/USD pair continued its rally in 2021. It reached above 0.80, but from that moment on, bears stepped in, and the pair dropped almost four-hundred pips.
The Reserve Bank in Australia (RBA) must be content. Despite its efforts of cooling the Aussie’s strength, investors kept bidding for the AUD pairs, to the RBA’s frustration. Not even more easing and new forward guidance suggesting new accommodative measures were enough to stop the advance. Yet, the move higher in the U.S. long yields did.
At this point, the Aussie pair looks weak both on fundamentals and technical. From a fundamental perspective, the stronger than expected economic recovery in the United States should boost a stronger dollar. Plus, the entire investing community is net short dollars, as per the mega-consensus in the markets at the end of 2020.
AUD/USD Technical Analysis
From a technical perspective, bears start seeing some cracking signs in the strength of the AUD/USD bullish trend. First, there is a bearish divergence with the RSI. This is the daily chart, so it does matter. Second, there is a head and shoulders pattern that is yet to break its neckline. A move below the neckline should trigger more weakness, with 0.70 becoming the first line of defense. On the flip side, a move above 0.80 would invalidate the bearish scenario.
AUD/USD Price Forecast
