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Aussie Dollar at Head and Shoulders Neckline

CMC Markets

If you draw a trend line across the peaks of 24 July and 19 August on the daily chart you can see it forms the neck line of an upside down head and shoulder pattern The last 3 lows form a head and shoulder with the middle one (the head) being below the 2 shoulders. Although in this case the left "shoulder" is lower than the right one, the basic pattern suggests choppy, low momentum behavior that often comes before a change in trend. A clear break above the neck line would usually be seen by technical analysts as a potentially bullish sign. However, many would want to see price get well above the neck line to cut down the risk of a false break.

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