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The Australian dollar is attempting to stabilize above the 0.7500 level against the US dollar as traders start to position themselves ahead of the July interest rate decision and policy statement from the Reserve Bank of Australia.
Traders sold the AUDUSD pair broadly last week as commodity-related currencies came under pressure against the greenback. A minor recovery has taken place in the AUDUSD since last Friday, however, the pair sits at an inflection point ahead of the RBA decision.
Buyers of the AUDUSD pair may be anticipating that the RBA are going to be more hawkish this week due to the extremely strong May jobs report, which showed that eemployment in Australia increased by 115,200 to 13.12 million in May 2021.
The May report easily beating market forecasts of a 30,000 gain, while part-time employment rose 97,500 and full-time employment expanded 17,700. Over the year to May, employment went up 987,200 people, or 8.1 percent
Traders that are bearish towards the AUDUSD pair also have a strong case for further dovish comments from RBA members amidst ongoing COVID-19 restrictions in several states.
The Australian economy is likely to suffer a setback as nearly half the population, more than 12 million people, are under stay-at-home orders in Sydney, Brisbane, Perth, Darwin, Townsville and the Gold Coast.
One thing is for sure, buyers need to stabilize the pair above the 0.7580 area this week to avoid a large head and shoulders pattern playing out to the downside, and the pair eventually falling towards the 0.7300 area.
According to the ActivTrader market sentiment tool some 46 percent of traders are bearish towards the AUDUSD pair. In order for the AUDUSD pair to finally rally we probably need to see negative sentiment increase much more.
AUDUSD Short-Term Technical Analysis
The four-hour time frame continues to show that a head and shoulders has been activated, following last week breach of the 0.7580 support 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 300-point directional could be in progress. However, traders do need to be careful as a potential bear trap could be forming.
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AUDUSD Medium-Term Technical Analysis
Looking at the daily time chart, the trend has now turned bearish for the first time since May 2020 after the AUDUSD pair slipped under its 200-day moving average, around 0.7560, last week.
If the trend remains bearish the AUDUSD pair could slip all the way towards the 0.7240 area. This is a possible target due to the fact that the daily time frame shows bearish MACD price divergence extending down to that area.
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