The Australian dollar has started to correct lower against the greenback after the Australian central bank released the Meeting Minutes from the previous interest rate decision.
Looking at analyst forecasts ahead of the decision ANZ bank anticipates that the RBA will implement a 25-basis point rate hike in its upcoming policy meeting, despite recent weak CPI data.
The bank believes that this decision could provide an impetus for the Australian dollar to rally, particularly against the New Zealand dollar. The Australian dollar potential rally is expected to be more pronounced against G10 currencies than against the US dollar.
Also, the New Zealand dollar is expected to face more downward pressure, especially when compared to the Australian dollar following the Reserve Bank of Australia decision.
According to the ActivTrader market sentiment tool some 34 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 if the price drops below 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, 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 restest of the 0.6600 level area also appear to be another strategy for the bears.