AUD/USD Rate On Track To Negate Head-and-Shoulders Formation


AUD/USD appears to be on track to negate the head-and-shoulders formation from earlier this year as it clears the opening range for April, and the decline from the February high (0.8007) may end up being a correction in the broader trend rather than a change in behavior amid the failed attempt to close below the neckline.


AUD/USD trades to a fresh monthly high (0.7785) despite the bearish reaction to Australia’s Employment report, with the exchange rate coming up against the March high (0.7849) as it climbs back above the 50-Day SMA (0.7721).

Image of DailyFX economic calendar for Australia

Looking ahead, it remains to be seen if the minutes from the Reserve Bank of Australia’s (RBA) April meeting will influence AUD/USD as the central bank pursues its second round of government bond purchases totaling A$100B, but more of the same from Governor Philip Lowe and Co. may produce headwinds for the Australian Dollar as “the Bank is prepared to undertake further bond purchases if doing so would assist with progress towards the goals of full employment and inflation.”

It seems as though the RBA is in no rush to scale back its emergency measures as “the Board is committed to maintaining highly supportive monetary conditions until its goals are achieved,” and the RBA Minutes may derail the recent advance in AUD/USD if the central bank shows a greater willingness to further utilize its balance sheet.

However, the RBA may start to lay out an exit strategy as “the recovery is expected to continue, with above-trend growth this year and next,” and a less dovish forward guidance may help to negate the head-and-shoulders formation from earlier this year as AUD/USD appears to be on track to the March high (0.7849).

Meanwhile, the recent flip in retail sentiment has largely dissipated like the activity seen in 2020, with the IG Client Sentiment report showing 43.33% of traders currently net-long AUD/USD as the ratio of traders short to long stands at 1.31 to 1.

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