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The Australian dollar has risen back towards the 0.7400 resistance level against the US dollar after the Reserve Bank of Australia brushed aside COVID-19 concerns and said that they had changed their tapering plans.
Market participants sighed a relief as they expected the RBA to talk down tapering due to the COVID-19 lockdowns in the largest Australian states. The RBA also kept rates unchanged at 0.10 percent and 3-year bond yields at 0.10 percent.
According to the RBA policy statement the central bank with continue to purchase five billion Australian dollars in bonds per week until early September before switching to 4 billion Australian dollars in November.
The AUDUSD pair is enjoy a strong bid tone as the RBA noted that if the recent virus outbreak is contained then the economy should be able to bounce back. Financial markets will be closely watching the COVID-19 situation in Australia.
It may be too premature to turn bullish towards the AUDUSD pair, given that the outbreak may not be contained, and the RBA may have to talk back Tuesday’s policy statement next month.
A large, inverted head and shoulders pattern has now formed, meaning that the AUDUSD pair is very likely a cautious buy right now. The pattern is predicting a higher run with the 0.7500 level the near-term target.
According to the ActivTrader market sentiment tool some 55 percent of traders are bullish towards the AUDUSD pair, which suggest further upside is likely in the short-term.
In order for the AUDUSD pair to really build sustained upside momentum we probably need to see negative sentiment kicking in. As things stand, everything is pointing to a slow grind higher.
AUDUSD Short-Term Technical Analysis
The four-hour time frame shows that a large, inverted head and shoulders pattern has formed, following the recent rise back towards the 0.7400 resistance level.
According to the overall size of the bullish price pattern a break above the 0.7400 resistance level exposes further upside towards the 0.7500 level.
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AUDUSD Medium-Term Technical Analysis
Looking at the daily time chart a head and shoulders has been still in play while the AUDUSD pair trades below the neckline of the bearish pattern, around the 0.7580 resistance level.
The AUDUSD pair remains extremely vulnerable while the price trades under neckline resistance. According to the overall size of the head and shoulders pattern, a towards the 0.7000 level is still possible.
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