AUD is not very keen to use hawkish RBA as a buy signal
21 February 2023
On Tuesday, the Australian Dollar received a theoretical boost from hawkish minutes released by the RBA, which indicated that interest rates are still low compared to other developed countries and that further rate hikes may be expected. Despite this bullish view, AUD has not shown much strength today. This may be attributed to the "buy the rumors, sell the facts" phenomenon.
From a technical standpoint, AUD/USD is in an intriguing position. It has formed a significant Head and Shoulders pattern (shown in yellow) with the right shoulder already below the uptrend line (shown in blue). The neckline, which is a green horizontal resistance at 0.69, has been breached. Additionally, the recent drop may be contained within a wedge pattern (shown in red). So, what do these technical factors suggest?
Currently, the price being below 0.69 signals a bearish sentiment, which may prompt a short position. However, if the price breaks above the red resistance, it could signal a buy. This would indicate a rejection of the Head and Shoulders pattern and the activation of the wedge as a trend continuation pattern. Prior to the wedge formation, the trend was bullish. In the next few days, we may have a clearer indication of which direction the price will move.