Decisive slippage below 0.6630 to strengthen H&S breakdown
- An H&S formation has bolstered signs of a bearish reversal head.
- A test of 200-EMA indicates that the asset is at a make or a break level.
- The RSI (14) has shifted into the bearish range of 20.00-40.00, which signals more weakness ahead.
The AUDUSD pair has dropped to near 0.6640 in the Asian session as a sheer decline in risk appetite has impacted risk-perceived assets. The asset is declining after facing barricades around 0.6720 as the US dollar index (DXY) added gains further. The DXY has refreshed its weekly high at 107.38 and is expected to add more gains ahead.
S&P500 futures have surrendered the majority of Friday’s gains in the Tokyo session. While the 10-year US Treasury yields have dropped below 3.80%.
On an hourly scale, the asset has formed a Head and Shoulder (H&S) pattern that signals a bearish reversal. The chart pattern indicates a prolonged consolidation, which results in sheer momentum after a breakdown of the neckline placed around 0.6630.
The 50-period Exponential Moving Average (EMA) at 0.6687 has tilted towards the south, which adds to the downside filters. Also, the 200-period Exponential Moving Average (EMA) has been challenged at 0.6645, which will keep the asset on the tenterhooks.
Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.
Going forward, a breakdown of the H&S neckline at 0.6630 would confirm the bearish reversal, which will drag the asset towards November 8 high at 0.6550, followed by November 10 low around 0.6400.
On the flip side, a break above Friday’s high at 0.6730 will negate the H&S formation and will drag the asset towards Tuesday’s high around 0.6800 and the round-level resistance at 0.6900.
AUDUSD hourly chart