The Australian dollar is once again struggling for direction on the foreign exchange market against the US dollar despite a number of important fundamental developments happening this week surrounding the Australian economy.
Earlier this week the AUDUSD pair failed to react after the Reserve Bank of Australia hinted that they could increase their QE purchases next month to keep the Australian economy on track.
RBA Governor Lowe also noted that the central bank is likely to keep interest rates on-hold at a record low 0.1 percent until 2024. By keeping the interest rate ultra-low the central bank hopes to increase the supply of money flowing into Australia, which could keep borrowing costs low and further boost the domestic economy.
AUDUSD traders also failed to react to the better-than-expected GDP print from the Australian economy today, which showed the economy expanding by 1.8 percent during the first quarter of 2021.
Potentially, markets are focusing on the on-going COVID-19 lockdown in Melbourne, which has been extended by a further 7-days. Market participants could be on the fence in case the series of lockdown extend nationwide and dampen the future growth prospects of the country.
Bulls and bears have been battling around the 0.7700 to 0.7900 levels since mid-April making the AUDUSD pair extremely difficult to trade as it remains in a strong uptrend but has stopped making new highs.
According to the ActivTrader market sentiment tool some 60 percent of traders are bearish towards the AUDUSD pair. In order for the AUDUSD pair to rally we probably need to see negative sentiment increasing. Traders should be careful about a potential bear trap forming.
AUDUSD Short-Term Technical Analysis
The one-hour time frame continues to show that a head and shoulders pattern is present, although the pattern has yet to be activated, despite multiple attempts.
According to the overall size of the head and shoulders pattern, a 200 point directional move will take place once a break from the 0.7700 to 0.7900 price range takes place. It remains unclear whether the pattern will be activated or invalidated at this juncture.
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AUDUSD Medium-Term Technical Analysis
Looking at the daily time chart, a much large head and shoulders pattern is looming over the AUDUSD, although similar to the lower time frames, it has not been activated yet.
According to the overall size of the bearish price pattern, the AUDUSD pair could be about to drop towards the 0.7050 level if sellers move the price under neckline support, around 0.7570.
AUDUSD traders should be aware that sellers have been struggling to ignite the pattern and could potentially invalidate this pattern if a move above the 0.8000 level took place. This could cause the AUDUSD pair to surge towards the 0.8500 level.
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