- AUD/USD H&S is in the making so long as bears stay on top at this juncture.
- The US dollar net positioning is overstretched and so too are both daily RSIs and weekly RSIs.
It has been one-way traffic on the Aussie throughout the 11 consecutive days of the US dollar's decline.
There are a number of reasons to worry for the USD bear crowd:
i) Positioning is stretched, USD liquidity momentum remains poor, ii) activity is levelling off and iii) YCC steepener bets are already VERY consensus-like and iv) moreover, printing presses will continue for as long as inflation is not rebounding.
If the euro is the main G10 determining the direction of the dollar right now as its presses through a 12-year downtrend's resistance line, then it is worth noting that last week, ECB member Stournaras indicated that even the pandemic emergency purchase programme (PEPP), will not end until the inflation outlook is firmly back on track, much like the asset purchase programme (APP).
We are not yet still seeing long bond yields which makes a resurgence in the dollar a compelling probability, at least until a reflationary spiral is in place.
This leaves the precious metal's market and the commodity complex in general vulnerable, especially at such extremes.
Ahead of this week's Reserve Bank of Australia, it is therefore apt that the Aussie looks so toppy on the charts with prospects of 'head and shoulders' formation in the making.
It will also not help the bull's case that at the start of the week, the Australian treasurer Frydenberg has said that the economic impact from Victoria lockdown will be greater.
Weekly chart
Daily chart
Daily H&S in the making?
The above scenario and possible price action would obviously all be invalidated with a continuation of the sell-off in the greenback and subsequent long risk-on markets.
The 55-month moving average is located at 0.7284 should the support structure stand the test of time over the course of this week's pretty full economic calendar from both sides of the Pacific.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD attacks 1.0800 ahead of EU inflation data
EUR/USD is battling 1.0800 in the early European session on Tuesday, undermined by the latest US Dollar bounce. Traders keenly await the EU inflation data and the US jobs survey for further impetus as US President Trump's 'reciprocal tariffs' announcement looms on Wednesday.
GBP/USD treads water above 1.2900 ahead of US data, tariffs
GBP/USD is trading on the defensive while holding above 1.2900 in Tuesday's European trading. The pair loses ground amid a modest US Dollar uptick as traders resort to repositioning in the lead-up to the top-tier US economic data releases and Wednesday's tariffs announcements.
Gold price eases from record high; bullish bias remains amid worries over Trump's tariffs
Gold price retreats slightly after touching a fresh all-time high on Tuesday as bulls pause for a breather and opt to wait for US President Donald Trump's reciprocal tariffs announcement. Adding to this, a positive tone around the Asian equity markets also acts as a headwind for the commodity amid overbought conditions on the daily chart.
PEPE could rally to double digits if it breaks above its key resistance level
Pepe memecoin approaches its descending trendline, trading around $0.000007 on Tuesday; a breakout indicates a bullish move ahead. Moreover, PEPE's long-to-short ratio supports a bullish thesis as bullish bets among the traders reach the highest over a month.
Is the US economy headed for a recession?
Leading economists say a recession is more likely than originally expected. With new tariffs set to be launched on April 2, investors and economists are growing more concerned about an economic slowdown or recession.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.