I would like to bring to everyone’s attention the monthly timeframe on the AUD/USD pair. While this is the largest timeframe possible and the worse one to do technical studies on, it is worth mentioning the horizontal resistance ahead of the AUD/USD.
At this point, we may say that the bounce from the lows caused by the COVID-19 pandemic has followed the rules of an inverse head and shoulders pattern. The market formed a continuation pattern during a bearish trend, then an aggressive move lower, followed by a retracement to the horizontal area.
More precisely, the price has met resistance at the neckline, and the path of least resistance is a consolidation for the right shoulder in the pattern. Therefore, a contrarian trade against resistance with a target at the 0.70 may appeal to bears.
There is, however, one problem. The stock market in the United States. While the stock market remains bid, the AUD/USD will still find buyers on every dip.
The recent decline in the Nasdaq 100 index may be the start of an ampler move lower. If that is the case, the AUD/USD bears will likely step in.
Bears may want to sell the AUD/USD short with a stop at 0.80 and 0.70 take-profit. While the risk-reward ratio is not so appealing, everyone should keep in mind that this is a contrarian trade.
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