AUD/USD rises to third test of resistance
James Chen March 6, 2014 9:29 PM
<p>AUD/USD (daily chart) has risen for a third time to key resistance around the 0.9080 level and has, in the process, formed a potential inverted […]</p>
AUD/USD (daily chart) has risen for a third time to key resistance around the 0.9080 level and has, in the process, formed a potential inverted head-and-shoulders pattern. The 0.9080 level represents major resistance, as it has halted the currency pair’s advance on two recent occasions – both in mid-January and mid-February. This level is also the 38% Fibonacci retracement of the last major bearish run – from October’s intermediate high at 0.9757 down to late January’s three-and-a-half-year low of 0.8659.
The inverted head-and-shoulders pattern that has tentatively formed – with its left shoulder at mid-December’s low, head at late January’s noted long-term low, and right shoulder at early March’s low – also has its neckline at the noted 0.9080 resistance level. A potential reversal or interruption of the entrenched bearish trend could be in the making if there is a strong breakout and follow through above this level. Incidentally, if valid, this would be the third head-and-shoulders reversal pattern since June of 2013.
In the event of a breakout above the neckline resistance at 0.9080, the key upside target would reside initially around the 0.9400 level. This would be contingent on a breach above the 200-day moving average. To the downside, if the pair fails at or near the current resistance, downside support once again resides around the 0.8850 level.
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