AUD/USD (daily chart as of July 29, 2013) has been trading below the key resistance of 0.9300/40 for more than a month. The pair broke out above a falling wedge on July 9, and reached a high of 0.9300 on July 11. The 0.9300 level is the first strong resistance that the pair was expected to face. A potential “head and shoulders bottom” (or “inverse head and shoulders”) pattern is in the making (on the daily chart: LS-Left Shoulder; H-Head; RS-Right Shoulder). The neckline is right in the resistance zone between 0.9300 and 0.9340/80. The pair needs to break out above that neckline and the resistance zone to confirm the bullish reversal pattern. An initial projection target would be around 0.9650.
There is a short-term uptrend line connecting the “head” and “right shoulder” of the pattern. If price can hold above that line and also above the daily EMA 20, which is turning up and currently at around 0.9230, a breakout could take place shortly. Otherwise, more complicated price action would be expected ahead, including possible pattern transformations. In the event that price breaks down the short-term uptrend line and the “right shoulder” (0.9127), price could retest the key 1.9000 support. The daily RSI keeps testing line 1 and is turning down from 50. The daily MACD has a bullish crossover from below zero, but momentum is weakening with the MACD line turning down. Watch for a possible MACD bearish crossover below zero.
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