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AUD/USD Technical Analysis: Bearish Setup Hints Top in Place

AUD/USD Technical Analysis: Bearish Setup Hints Top in Place

2016-10-07 10:38:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • AUD/USD Technical Strategy: Short at 0.7570
  • Aussie Dollar appears to have completed Head and Shoulders top
  • Short trade in play but time constraints established to manage risk

The Australian Dollar may have established a significant top against its US namesake after prices seemingly completed a bearish Head and Shoulders pattern. The currency began to carve out a top after putting in an Evening Star candlestick formation below double top resistance near the 0.77 figure.

From here, a daily close below the 38.2% Fibonacci expansion at 0.7496 – a barrier reinforced by a rising trend line set from mid-January now at 0.7505 – exposes the 50% level at 0.7415. Alternatively, a reversal back above the 23.6% Fib at 0.7597 opens the door for a retest of the double top at 0.7699.

A short AUD/USD position has been activated at 0.7570, initially targeting 0.7515. This is the level where the trend line will be on October 12 and the last day at which risk/reward remains acceptable given an upward-sloping support barrier. If the target is not reached by 17:00 ET on that day, the trade will be unwound. Additionally, a stop-loss will be activated on a daily close above 0.7597. Half of exposure will be booked and the stop-loss moved to breakeven if the first target is met.

What do past AUD/USD price patterns hint about on-coming trends? Find out here!

AUD/USD Technical Analysis: Bearish Setup Hints Top in Place

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