Just last week, AUD/USD broke below the neckline of the head and shoulders pattern on the 4-hour time frame, indicating that a long-term downtrend might be in the cards. However, the pair looks prime for a retracement as sellers gather more energy.
Stochastic is still climbing out of the oversold levels, suggesting that a bounce is in the cards for the near term. From there, the pair might find resistance around the .9300 handle, which is around the broken neckline.
Shorting at .9300 with a stop above the 61.8% Fib or wider could yield a good return on risk. Aiming for new lows or the next support at .8900 is a potential swing trade opportunity until the end of the year but locking in profits or moving the stop to entry once price tests the recent lows at .9100 can help limit exposure.
By Kate Curtis from Trader’s Way