AUD/USD price analysis: building a bearish head and shoulders
AUD/USD price analysis: selling into the right shoulder of a possible head-and-shoulders pattern. Target level 0.6930
Market highlights from the last week
Wednesday July 29: The Federal Reserve made no policy changes. It remained committed to a very accommodative policy and Chair Powell warned that the economic recovery had slowed
Thursday July 30: risk appetite was fragile amid earnings fears and US political uncertainty as Trump called for an election delay
Friday July 31: there was volatile month-end trading on Friday with an underlying lack of liquidity amplifying moves
Monday August 3: commodity currencies retreated initially before regaining ground as the US dollar slipped
Tuesday July 4: The US dollar attempted to regain ground on Tuesday, but selling resumed in New York as the lack of yield support continued to erode underlying support
AUD/USD price analysis
Let us have a look at the technical viewpoint:
Monthly: traded to a multi-year low of 0.5506 in March. The trend of lower lows at 0.6845 has been clearly broken. What was resistance is now support
Weekly: the majority of last week's initial gains were sold into. This candle is an inverted hammer and is often seen at the top of a trend.
Daily: bearish divergence can be seen on the daily chart (the chart makes a higher high while the oscillator makes a lower high). This often indicates the end of a trend or at least a correction to the downside.
What is your sentiment on AUD/USD?
Intraday four-hour: buyers emerged close to the previous swing low of 0.7063 (July 24). Trend line resistance is located at 0.7200. A rejection of this level and we have a possible right shoulder of a head-and-shoulders pattern. A break of support at 0.7080 and the measured move target is 0.6930
Outlook: selling into the right shoulder of a possible head-and-shoulders pattern. Target level 0.6930
Possible trade setup:
Action: selling at 0.7200 (right shoulder)
Stop: 0.7230 (above the swing high)
Target: 0.6930 (measured move target)
Potential return on risk to first target: R9 (reward 270 / risk 30)
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