Let’s begin the day with a look at the Aussie dollar! Looking at the 4-hour chart, we see that a double top formation has formed on the pair. So far, it seems that the neckline is holding up, as price action has bounced from the support. With the pair showing bullish divergence, we could see buyers reenter the market and attempt to bring price action back up to test the previous high just above 0.9400. At the same time, this could be the start of a head and shoulders formation forming. The pair could find some resistance at 0.9370 before falling once again. On the other hand, if we see sellers dominate trading, they could bring price back down to test the neckline. If the neckline doesn’t hold, price action may dip all the way down to support near 0.9180.
The GBPUSD 4-hour chart reveals that the pair has been performing well since early last month, rallying almost 1300 pips to 1.7000 from a low of 1.5708, give or take a few retracements in between. It seems that some signs that buyers are getting exhausted have popped up. Firstly, a rising wedge reversal pattern has formed. Notice how price is starting to consolidate at the tip of the formation as buyers are unable to push it higher. Second, stochastics just got out of overbought territory and is currently trending downwards. The thing to watch out in this chart formation is the lower bound rising trend line support. If price manages to pierce through, the pair’s next stop would probably be 1.6500 and 1.6250, respectively. For the mean time, however, price could still head over to this year’s highest levels around the 1.7000 region.
In an almost perfect fashion, USDCAD bears jumped back in the overall downtrend and sold the pair yesterday. Notice the bearish engulfing candle right smack on the .500 Fibonacci retracement level, which, coincidentally, intersects with both a previous broken support and the falling trend line. If this kind of seller momentum persists, expect the pair fall towards last week’s lowest price level at 1.0420. Conversely, if momentum fades, we might see another test of the falling trend line resistance and 1.0600.