AUD/USD Forms Bearish Reversal Pattern Ahead of Key Data
AUD/USD has formed a bearish swing failure pattern on the daily chart, suggesting a possible reversal after failing to break July's highs. While this pattern has previously predicted strong moves, upcoming Australian GDP and US non-farm payroll data could still sway the pair's direction.
Understanding the Swing Failure Pattern and Its Implications
A swing failure pattern generally occurs when a currency pair tests a recent swing high (or low) but fails to sustain the momentum, ultimately reversing direction. In the case of AUD/USD, the pair recently retested the highs set in July but failed to break higher, subsequently retreating below last week’s swing lows. This downward move has confirmed the bearish swing failure pattern, signalling the potential for a trend reversal to the downside.
The significance of this pattern is heightened given its recent ability to identify key inflection points on AUD/USD’s daily candle chart. Earlier this year, the formation of a bullish swing failure pattern in April led to a strong rally that persisted throughout the month. A similar bullish pattern emerged in August, and once again, it was followed by a robust rally.
AUD/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
Caution: Not All Patterns are Created Equal
While the bearish swing failure pattern suggests a potential reversal, it's essential to remember that no price pattern is foolproof. The inherent limitation of this pattern is that it typically goes against the dominant momentum in the market. In the current context, broader market forces and sentiment towards the Australian and US economies could still overpower this technical signal, rendering the pattern less effective.
Key Economic Data Releases to Watch This Week
Traders should be particularly vigilant this week as several critical economic events are lined up that could impact both the Australian dollar and the US dollar. On Wednesday, Australia will release its Q2 GDP numbers, providing insight into the country's economic growth trajectory. Additionally, the US Federal Reserve will publish its Beige Book, summarising current economic conditions across the US, which could provide hints about future monetary policy. The week will culminate with the highly anticipated US non-farm payrolls data on Friday, a key indicator of the health of the US labour market.
These events could potentially cause a sharp increase in AUD/USD’s volatility and should be factored into risk management strategies.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Understanding the Swing Failure Pattern and Its Implications
A swing failure pattern generally occurs when a currency pair tests a recent swing high (or low) but fails to sustain the momentum, ultimately reversing direction. In the case of AUD/USD, the pair recently retested the highs set in July but failed to break higher, subsequently retreating below last week’s swing lows. This downward move has confirmed the bearish swing failure pattern, signalling the potential for a trend reversal to the downside.
The significance of this pattern is heightened given its recent ability to identify key inflection points on AUD/USD’s daily candle chart. Earlier this year, the formation of a bullish swing failure pattern in April led to a strong rally that persisted throughout the month. A similar bullish pattern emerged in August, and once again, it was followed by a robust rally.
AUD/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
Caution: Not All Patterns are Created Equal
While the bearish swing failure pattern suggests a potential reversal, it's essential to remember that no price pattern is foolproof. The inherent limitation of this pattern is that it typically goes against the dominant momentum in the market. In the current context, broader market forces and sentiment towards the Australian and US economies could still overpower this technical signal, rendering the pattern less effective.
Key Economic Data Releases to Watch This Week
Traders should be particularly vigilant this week as several critical economic events are lined up that could impact both the Australian dollar and the US dollar. On Wednesday, Australia will release its Q2 GDP numbers, providing insight into the country's economic growth trajectory. Additionally, the US Federal Reserve will publish its Beige Book, summarising current economic conditions across the US, which could provide hints about future monetary policy. The week will culminate with the highly anticipated US non-farm payrolls data on Friday, a key indicator of the health of the US labour market.
These events could potentially cause a sharp increase in AUD/USD’s volatility and should be factored into risk management strategies.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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