AUD/USD Price Analysis: Bearish head and shoulders spotted on hourly charts

• AUD/USD witnessed some selling on Thursday and reversed the previous day’s positive move.
• Sustained weakness below the 0.7700 mark will validate a bearish head and shoulders pattern.

The AUD/USD pair refreshed daily lows, around the 0.7720 region during the early North American session and has now reversed the previous day’s positive move.

Renewed fears about another dangerous wave of coronavirus infections in some countries drove some haven flows towards the US dollar and drove flows away from the perceived riskier aussie. The USD was further supported by a goodish intraday rebound in the US Treasury bond yields and better-than-expected Jobless Claims data.

From a technical perspective, the recent price action over the past one week or so now seemed to constitute the formation of a bearish head and shoulders pattern on hourly charts. The neckline support is pegged near the 0.7700 mark, which if broken will suggests that the recent positive move has already run out of steam.

The set-up is reinforced by the fact that technical indicators on hourly charts have been drifting lower in the bearish territory. Moreover, oscillators on the daily chart – though are still holding in the positive territory – have been struggling to gain any meaningful traction, adding credence to the negative outlook.

That said, it will still be prudent to wait for sustained weakness below the 0.7700 level before confirming a near-term bearish breakdown and positioning for any further depreciating move. The AUD/USD pair might then turn vulnerable to accelerate the fall towards a trading range resistance breakpoint, around the 0.7660 area.

This is followed by support near the 0.7600 round-figure mark. Some follow-through selling should pave the way for an extension of the downward trajectory and allow bearish traders to challenge YTD lows, around the 0.7530 region.

On the flip side, the 0.7760-65 region now seems to have emerged as immediate strong resistance. A convincing breakthrough might trigger a short-covering move and lift the AUD/USD pair back towards the 0.7800 mark. Any subsequent strength, leading to a move beyond the 0.7815 region will negate any near-term bearish bias.

AUD/USD 4-hour chart

Technical levels to watch