AUDUSD Reversal Patterns Confirmed

The USD is in a clear uptrend. The AUDUSD technical picture reflects this theme and recent price developments suggest the Aussie is likely to depreciate near-term. The key technical features are:

• On Feb 26, the pair confirmed a break of a trendline support that had been in place since Mar 19, 2020. This highlighted the first reversal threat of the 11 1/2 - month uptrend.
• Selling pressure on Mar 23 highlighted a second reversal signal. This time price breached what appears to be a neckline of a head and shoulders (H&S) reversal pattern. The neckline is the trendline that connects the two price points (lows) that represent the left and right shoulders of the pattern. Furthermore, price action since the break has remained below the neckline and the neckline is providing resistance.
• Momentum studies have also recently highlighted a reversal threat - a condition known as bearish divergence between price and momentum started mid-December. The recent trendline break and the H&S reversal confirms this threat and it appears that momentum as highlighted by the 14 day RSI, is trending down. This reinforces bearish conditions.
• The H&S pattern also provides a price projection based on the height of the pattern. In this instance it is 0.7200. Ahead of this level there are a number of possible support levels / objectives:
  • 0.7418 23.6% retracement of the Mar 2020 - Feb rally.
  • 0.7272 1.50 projection of the Jan 25 - Mar 5 - Mar 18 downleg.
• Key resistance has been defined at 0.7849, Mar 18 high. This also represents the top of the right shoulder, where a break is required to negate the reversal pattern. Initial resistance levels are:
• 0.7664 High Mar 30 and resistance highlighted by the neckline.
• 0.7750 Mar 23 high.