AUD/USD Retests the Neckline of a Head and Shoulders – Remains Bearish

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Written By: Mircea Vasiu
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    Summary:
  • AUD/USD head and shouldersr formation points to a move to 0.7275. The inflation data in the United States will be responsible for increased volatility.

Ahead of the U.S. inflation data, the AUD/USD pair retests the neckline of a head and shoulders pattern. It remains bearish, despite the fact that most market participants expect the inflation to overshoot in the medium term.

The market’s volatility decreased drastically in the last few days. Whenever volatility drops, as measured by the volatility index VIX, the stock market remains elevated and jumps to new highs. It happened again yesterday, as the S&P500 printed a new all-time high.

While the Reserve Bank of Australia (RBA) expanded its balance sheet dramatically during the pandemic, the market still bought Australian dollars. In fact, it is hard to say if the market participants bought AUD or sold USD. In any case, the AUD/USD pair remains one of the top-performing pairs during the pandemic.

AUD/USD Technical Analysis

The pair has formed a head and shoulders pattern recently. It currently retests the neckline, and the measured move points to 0.73 and below. Bears may want to remain on the short side with a stop at the highest point in the right shoulder and a target of 0.7275. Inflation data later in the American session may give the AUD/USD pair a reason to move.

AUD/USD Price Forecast

Written By: Mircea Vasiu

Mircea, MBA in International Business graduating Magna Cum Laudae, trades for a living and contributes to various financial publications for more than six years. He writes about macroeconomics, stock indices, currencies, and most recently ETFs and individual stocks. For the past decade, he’s involved in everything trading related, mostly in the currency market, both with manual and algorithmic trading.

Published by
Written By: Mircea Vasiu