AUDUSD has recently been on a short-term climb, but it looks like the rally could be reversed now that a head and shoulders forex chart pattern formed on its 1-hour forex time frame. Price is a few pips away from testing the forex chart pattern neckline below the .8700 handle and may be due for a breakdown soon.
If that happens, the pair could fall by as much as 100 pips, which is the same height as the chart pattern. This could take AUDUSD to the next support zone around the .8550-.8600 levels. Stochastic is heading lower, reflecting a pickup in selling pressure.
Forex Chart Pattern Signal
MACD, on the other hand, is on middle ground and barely offering any clear clues. For now, the 100 SMA is moving above the 200 SMA, indicating that there’s a chance that the uptrend could carry on.
Event risks for this forex chart pattern signal include the release of the FOMC minutes later on, which might confirm whether or not the Fed is on track to tighten sometime next year. Hawkish remarks could reaffirm dollar strength against the “historically high” Australian dollar.
There are no reports lined up from Australia for today, although the currency has been weighed down by a dovish RBA minutes and a fall in dairy prices in the latest Global Dairy Trade auction. This could mean weaker inflationary pressures down the line and a potential drop in export revenues, which could continue to weigh on the Australian dollar.
Risk sentiment also appears to be favoring the safe-haven US dollar for the time being, as geopolitical risks are still present. With that, the path of least resistance for this forex chart pattern is to the downside, although consolidation around the neckline is possible if market catalysts fail to provide a clearer direction this week.
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