The Australian dollar has started to look more under pressure at lower against the greenback after the Australian central bank released the Meeting Minutes from the previous interest rate decision.
Australia’s monthly inflation rate retreated in May, easing fears the Reserve Bank will host its key interest rate again at next Tuesday’s board meeting. This has affected the AUDUSD.
The headline consumer price index increase last month was 5.6%, the lowest since April 2022, data showed said on Wednesday. Economists had expected the measure to drop from April’s 6.8% level to 6.1%.
The underlying rate that strips out more volatile price movements came in at 6.4% compared with 6.5% in April. Again, this could tip the balance for the RBA staying pat.
With this in mind, the AUDUSD pair is also challenged technically and is trading in a serious head and shoulders price pattern, which could indicate more downside losses ahead.
According to the ActivTrader market sentiment tool some 29 percent of traders are bearish towards the AUDUSD pair. As we typically look to fade sentiment biases, this could mean the AUDUSD pair could continue to reverse lower.
It is worth mentioning that high levels of bullish sentiment suggest a classic contrarian sentiment trade is still in the making, so do be careful buying this pair at current level, especially as we trade around current levels.
AUDUSD Short-Term Technical Analysis
The four-hour time frame shows that a large head and shoulders type pattern has formed. We may see the AUDUSD pair forming a much larger reversal pattern if a drop under the 0.6600 area.
If the pattern is correct then a move back to the 0.6400 region seems plausible. If a strong upside breakout takes hold above 0.6800, Ichimoku cloud, then a rally towards 0.7000 resistance level might start to take place.
AUDUSD Medium-Term Technical Analysis
The daily time frame shows that a bearish head and shoulders pattern has also formed. Although a much larger one. These types of patterns are typically considered to be one of the most reliable bearish reversal patterns.
According to technical analysis we could see a much more steeper price drop if bulls don’t soon start to take charge. Selling a break of the 0.6600 level area also appear to be another strategy for the bears.