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Market Update: Could the AUDUSD be Heading Lower?

jeffriess
April 7, 2021
by Joseph Jeffriess, Market Analyst

Hi traders, today we are taking a look at the AUDUSD. The price and the 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 that was set up about an year ago. Two new lower highs are 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 AUDUSD 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.

Australian Dollar vs US Dollar Daily chart, 7 April 2021

AUDUSD D1 Chart

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 AUDUSD downtrend line we would start having doubts about the H&S pattern and seller numbers.

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