AUDUSD is currently treading water below the neckline of a head-and-shoulders (H&S) pattern. Not only is price up against the neck-line of the formation, but also trading at a trend-line off the high (H&S head). This confluence of resistance makes the next move crucial.
To potentially negate the bearish implications of the topping pattern, a push above the intersecting lines is needed. A move above 7700 should do the trick to get price moving towards the right shoulder over 7800. At this time that is seen as the lower probability play, but should it happen then a rally could commence towards the 8000 level or better.
A drop from here will have the September high and 200-day in play, both intersecting right around the 7400 level which will also mark as TP1. This is the first level of support to watch on weakness. This would be a pivotal test to see whether a decline can extend or will be truncated.
Given the sideways movement we have seen for the past couple of weeks, traders should be prepared to finally see a resolution. On this end, the above will be followed as a guide for the near-term trading bias.
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