Yikes! Is that a head and shoulders formation on the AUDUSD daily chart? Well, the pair still hasn’t broken below the neckline yet so we don’t know for sure whether the long-term uptrend will soon reverse. The pair is still safely above the rising trend line but it seems poised to retest that support area. It could bounce upon hitting the trend line around the psychological 0.9000 level, which coincides with the neckline of the head and shoulders formation. If it breaks below that level, well, the pair could tumble all the way down to the next support level in sight – which is just above the 0.8500 area.
Let’s now look at AUDUSD’s sister pair… the AUDJPY. Unlike the former, the AUDJPY’s short term uptrend line, as can be seen in its 1-hour chart above, is still intact. Presently, the pair is trading between 83.00 and 82.00. Its stochastics are still far from the oversold territory, indicating that it can still move lower. But for those who are long on the pair, don’t worry! The 82.00 mark or the uptrend line can keep it from falling further. So it’s possible for the pair to at least reach last week’s high if the uptrend line holds. On the flip side, if the 82.00 platform gets broken, the pair can fall down to the 81.12 support.
Now, let’s check out how our safe-haven pair is doing… The USDJPY just surged above the descending trend line on the 4-hour chart, signaling that the downtrend is most likely over. The pair could keep heading higher but it seems ready to retrace for a bit. Also, the stochastics are in the overbought area and is poised to move lower. The pair could pull back and retest the broken trend line right around the 50% or 61.8% Fibonacci retracement levels. Both these levels happen to be a few pips away from psychological numbers, 88.00 and 87.00 respectively.