AUDUSD Consolidates Above Dynamic Support Having a Bearish Bias
The AUDUSD pair looks ready to break lower as the price works its way through the right shoulder of a head and shoulders formation. The rising neckline acts as a support for now, with bears waiting for a break there.
The pair consolidates above the 0.7 level for quite some time now. Ever since it broke above the 0.7 level at the start of the summer, the AUDUSD never looked back.
However, the spikes higher were quickly retraced, and the market seems to look for direction from the Fed and the upcoming U.S. elections rather than from the RBA.
RBA Minutes Unlikely to Affect the AUDUSD Pair
The Reserve Bank of Australia (RBA) reveals its monetary policy minutes tomorrow, but the likelihood is that it will be a non-event for the AUDUSD pair. Just like the interest rate decision was a non-event two weeks ago, the market participants have no expectations from tomorrow’s minutes. The RBA stands ready to do more if necessary, but for now, the level of accommodation is viewed as appropriate.
AUDUSD Technical Analysis
The triangle forming as part of the right shoulder reflects the current stance in the FX market. The price action is slow, investors do not take risks, and rather prefer to wait what comes next from a monetary policy perspective.
Expect the consolidation to continue into the trading week, with Wednesday’s Fed decision to act as a possible catalyst for a break lower. To trade the head and shoulders pattern, bears must wait for the price to break the neckline first. Therefore, an even more sustained move lower is needed so that the price to break the series of higher lows.
When that comes, the short trade must have a stop-loss order at the highs seen in the right shoulder. As for the take profit, bears should consider a risk-reward ratio of minimum 1:2, but also the head and shoulders’ pattern measured move.