Currencies | Jul 14 2011
By Paul Robinson
The AUDUSD has been in the process of carving out a bullish inverted Head-and-shoulders pattern and on the verge of breaking out above neckline resistance @ 1.0790. Moving averages remain supportive of higher prices with short-term averages holding steady above longer-term averages. In this case I am referring to the 1-month/3-month EMAs. Sentiment is also supportive of higher prices as SSI (Speculative Sentiment Index) shows 71% of traders are positioned for lower prices. (Viewed as a contrarian indicator).
A breakout above resistance should pave the way for a retest and possible breakout of the April high of 1.1011. The H&S range suggest a 400 pip move above the 1.0790 level is possible, providing an overall target of 1.12. The alternative set-up is for price to remain contained below resistance and form a triangle pattern before breaking out. Whether the breakout happens now or after a triangle develops the positioning of traders combined with the prevailing trend favors higher prices in the near term.
The views expressed are not FNArena's (see our disclaimer).
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