AUD/USD Follow-Up: Bullish Head and Shoulders Pattern on the Verge of Breakout

Review of Previous Analysis

In our previous analysis, we highlighted the formation of a Morning Star pattern on the hourly chart, signaling a potential bullish reversal for AUD/USD. We also discussed the unusual disconnect between AUD/USD and gold prices, noting that while gold surged, AUD/USD lagged due to factors like USD strength, risk sentiment, and China's economic slowdown.

Since that analysis, AUD/USD has gained approximately 40 pips, confirming the anticipated bullish momentum. Now, a new technical formation has emerged, further reinforcing the upside potential.

Technical Update: Bullish Head and Shoulders on Hourly Chart

📈 Key Observations:
✅ AUD/USD has advanced ~40 pips since our last review, validating the bullish Morning Star signal.
✅ A bullish Head and Shoulders pattern has formed on the hourly timeframe.
✅ The pair is currently approaching a breakout zone, which could fuel further upside if confirmed.

Understanding the Head and Shoulders Pattern

The Head and Shoulders pattern is typically a bearish reversal formation, but when it appears inverted, it signals a bullish breakout. The structure consists of:
1️⃣ Left shoulder – A local low followed by a moderate rebound.
2️⃣ Head – A deeper low, creating the head formation.
3️⃣ Right shoulder – A higher low, indicating a shift in momentum.
4️⃣ Neckline (breakout level) – The resistance level that, once breached, confirms the bullish breakout.

🔹 Attached: Updated hourly chart of AUD/USD, highlighting the inverse Head and Shoulders pattern and breakout level.

Potential Next Moves

📌 Bullish Scenario: If AUD/USD successfully breaks above the neckline, it could gain additional momentum and extend its upward movement. The breakout target would be projected based on the pattern’s measured move, potentially adding another 30-50 pips in the short term.

📌 Bearish Risk: If the pair fails to break out and falls back below the right shoulder, it could signal exhaustion and trigger a short-term pullback. However, as long as key support levels hold, the bullish bias remains intact.

Gold Correlation & Broader Market Outlook

Gold prices continue to rise, yet AUD/USD's movement remains somewhat muted relative to gold's strength. This reflects the continued impact of broader USD strength and risk sentiment factors. However, if gold's momentum persists and risk appetite improves, AUD/USD may finally catch up with its historical correlation to gold.

Legal Disclaimer

This analysis is for informational and educational purposes only and should not be considered financial, investment, or trading advice. The author is not a licensed financial advisor, investment manager, or portfolio manager, and the information presented does not constitute a recommendation to buy, sell, or hold any financial instrument.

Trading in forex and commodities involves high risks, market volatility, and external macroeconomic factors that can significantly impact price movements. Readers should conduct their own research and seek guidance from a qualified financial professional before making any trading or investment decisions. The views expressed are based on publicly available data and technical indicators at the time of writing and may change without notice.