By: Mike Kulej
The Australian Dollar has resided in the realm of uncertainty over the last few weeks. Even though the Aussie’s fundamentals are positive, the currency has been responding unfavorably to other international news. Its pair with the US Dollar made a new high for the move, at 0.9221, before falling 0.8860 and then rebounding to 0.9080. This price behavior created a possible Head and Shoulder in the making, an important reversal pattern.
The high at 0.9068 can be the Left Shoulder, with the Head at 0.9221. As of right now, the high of 0.9079 made on Monday is the probable Right Shoulder. Both of the shoulders are at about the same level, giving the chart a symmetrical look, a positive sign. Another element of the pattern, the neckline, is created by connecting the lows of 0.8904 and 0.8859.
This chart formation is not confirmed yet, only a breakout under the neckline will complete it, leading to a bigger sell off. There is a small concern about the neckline – it is down sloping, giving the pattern somewhat smaller probability of being successful. Should the AUD-USD move above 0.9221, it would resume its uptrend and invalidate the developing Head and Shoulder pattern.
