The Australian dollar has hit a rough patch, and more bearish patterns are developing in its chart, suggesting things could get worse.
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The currency has formed what traders call a "head-and-shoulders" pattern — one of the most widely recognized signs that a trade may be running out of steam. Picture three mountain peaks: a smaller one on the left, a taller one in the middle, and another smaller one on the right. When prices fall below the low points connecting those peaks — a level known as the "neckline" — it signals the uptrend may have reversed.
That's exactly what happened on June 5, when a sharp sell-off pushed the Australian dollar below its neckline at 0.7068 against the U.S. dollar, while also breaching a separate indicator called the Ichimoku cloud — a widely used statistical tool that attempts to identify bullish and bearish territory. Taken together, the two signals paint a cautious picture.
A sustained close below these levels could open the door to further losses, with projections pointing to a potential slide toward 0.6878 — roughly a 3% drop from the neckline. A partial recovery on Monday offered some breathing room, but a rebound back above 0.7040 — the falling neckline — would be needed to neutralize the bearish signal entirely.
For now, the charts suggest the path of least resistance is lower.
What the chart shows:
(Daily markets commentary from Reuters analysts on the signals financial charts are sending — and what they might mean.)
