AUDUSD has risen substantially during the past year from a low back in March of 2020 at 0.5510 and after one year a couple of weeks, we find it at 0.7623. Price is still in bullish trend as it makes higher highs and higher lows, but we also have two warning signs.
Bearish divergence warning
Despite the new higher high in price, the RSI has not followed to new highs in the daily chart. This is a bearish divergence. Price has made a high at 0.80 put has reversed strongly since then starting a short-term sequence of lower lows and lower highs. The second warning provides us better information regarding price levels.
Head and Shoulders pattern
Red line - neckline support
AUDUSD has formed a head and shoulders pattern. Breaking below the neckline support (red line) will activate the bearish pattern. This support is found at 0.7575-0.7565. A 4 hour candlestick close below this level would be a bearish sign. The target of the bearish pattern if activated is at 0.7160-0.7180. Traders need to be very cautious given these two warning. The chances of a major reversal in AUDUSD are high.
