On March 18th, I mentioned a potential head and shoulders pattern on AUDUSD.
A few days later, the pair closed below the neckline at 0.7650.
However, on April 14th, the Australian dollar closed back above the neckline.
Or did it?
There’s almost always more than one way to draw and interpret a key level.
That’s one of the reasons trading is such a challenging endeavor.
If we look at the AUDUSD daily time frame, you’ll see more than one way to draw the neckline of the head and shoulders pattern.
The higher placement of the level is still technically valid, and you’ll note that the AUDUSD never closed the day above it.
Additionally, the market sold off on Tuesday from a previous resistance level at 0.7820.
This makes me think that the bearish bias is still intact for the Australian dollar.
The S&P selling off this week helps to confirm my suspicion.
Today’s candle is close to a bearish engulfing range, but not quite.
We may see a bounce from the 0.7700 handle, so looking for a 50% entry of Tuesday’s range isn’t a bad idea, perhaps near 0.7750.
A daily close below 0.7700 would re-expose the 0.7520 support area, followed by 0.7400.
Alternatively, a daily close above 0.7820 would negate the bearish outlook.