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AUD/USD is correcting lower after peaking recently at 0.8007, but downside momentum ebbs as the aussie approaches the early February lows of 0.7564. A bearish head-and-shoulders pattern appears as a work in progress pattern, but further declines require momentum best fuelled by a decline in iron ore prices, Benjamin Wong, Strategist at DBS Bank, informs.

Key quotes

“Technically, what is driving the decline appears to be two-fold – the inability of the mid-March advance to rally past 0.7849 (given the importance of the prior 0.7838 resistance pivot), and a bearish head-and-shoulders pattern has come to the fore. The latter pattern is in play as long as AUD does not push right through the 0.7802, 0.7835 shoulder points.”

“The reluctance to push right under 0.7564 means the right-hand shoulder of the pattern is a work in progress. This pattern would be in validation mode only (thus conditional) if AUD shows determined momentum under its 0.7650 neckline, and would start to target an attack at 200-day moving average (DMA) at 0.7378 and robust support down at 0.7339 (pattern target).”