Forex Technical Update
The AUD/USD found support heading into the 11/7 US trading session and is possibly forming the second shoulder to an inverted head and shoulder pattern. It is still too early to say, and only a break above the neckline area from 1.0428 to 1.0443 completes the bottoming pattern. The 1.05 pivot will be an important one, and if the market finds resistance there it could offer a throwback to test the bottoming attempt. If the market then finds support above 1.04, we would have a clearer upside bias that can extend toward 1.0540 (61.8% retracement), and the 1.0610 pivot. A conventional pattern breakout target is the width of the pattern toward the direction of the breakout. In the AUD/USD 'scase, that target is projected to 1.0650, with 1.0635 being the 78.6% retracement. If the rally is a correction to the dip that started 10/27, then the maximum upside outlook is the 1.0635-1.0650 area for now.
A failure to break above form the bottoming pattern, of after forming it, a failure to break above 1.05, could be a sign that market wants to continue lower towards 1.02 and then toward parity.
The AUD/JPY is in a similar scenario as the AUD/USD as it attempts to complete a second shoulder of a kilroy (another name for inverted head and shoulder). The 80.29 level provided support and the neckline at 81.40 is an important resistance to break to establish this bottoming pattern. The conventional breakout projection points to 83.20, with 83.03 as 78.6% retraement. So this 83.03-83.20 area should the maximum expectation consider this rally is going against a 5 wave decline that started Oct. 27 from the 83.95 high. The 61.8% retracement level at 82.31 should also be monitored as it is reinforced by a pivot area established 10/31 - 11/1, then as support to be tested now as resistance.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.