The AUDUSD pair corrects from the highs as the DXY recovers. The rout in the U.S. stock market added fuel to the fire as the Aussie pair is down two big figures in the last sessions.
It took an ugly head and shoulders pattern to signal the reversal, but the price finally broke below the neckline. Considering the importance of the round 0.70 level, it seems to be only a matter of time before the price eventually reaches it and more.
Australian Retail Sales Miss Expectations
The previous Australian session saw the surprise release of Australian retail sales. The drop of -4.2% fully offsets the previous rise of 3.2% seen in July, showing loss of momentum from the consumer spending front.
The PMI manufacturing and services failed to bring the much-needed bounce. Despite the services coming out at 50 and the manufacturing at 55.5, the AUDUSD pair continued its slide.
Moreover, the price action in crosses does not help. The EURAUD cross bounced from 1.61 and trades well above 1.64, putting further pressure on the Australian dollar.
AUDUSD Technical Analysis
The head and shoulders pattern took a long time to consolidate in the right shoulder. For more than two weeks, the AUDUSD pair consolidated in the triangular formation but keeping a bearish bias – it kept forming lower highs.
From the moment that it broke the neckline, it retested it, and did not look back anymore. Bears may want to join on the short side by trading at market or a possible pullback. In both cases, a move above 0.73 would invalidate the bearish scenario. As for the take profit, bears should consider a risk-reward ratio of 1:2 minimum. If that is the case, the AUDUSD pair should easily extend its drop below the 0.70 level.
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AUDUSD Price Forecast