Today we are taking a look at the AUDUSD as price and technical patterns are suggesting sellers may hold momentum.
Looking at the daily chart two main points jump out. Firstly, we can see a clear break of the main trend with two new lower highs confirming the break. We now also have a new downtrend that’s formed during the medium term, after the first lower high formed.
These on their own are decent signs showing seller strength. Secondly, if we take a closer look at the price we can see a head and shoulders pattern. The pattern is quite clear with two shoulders and the head which was the last HH of the trend.
Head and shoulders patterns are normally seen as reversal patterns at the tops of trends and are confirmed once the price closes below the pattern base. In this case, that’s the violet line.
The pattern is not normally seen as confirmed until the baseline is broken. Today’s price continues for now to push a new LH which suggest continuation. The LH lines up well with the H&S pattern and these together could be putting forward a bear case in the short to medium term.
Moving forward we would like to see today’s candle close lower and we would like to see sellers continue to move price lower breaking the baseline, confirming the H&S pattern. If this occurs we see a few lower levels of supply that could come in to play if reached.
If buyers fight back and force a close above the new downtrend line we would start having doubts about the H&S pattern and seller numbers.
Recommendation: Sell limit @ 0.76500