AUDUSD tests the broken neckline

One of the best looking setups among major pairs can be seen on the AUDUSD, where we do have a beautiful reversal pattern and according to the price action rules, we should soon see the further rise. We are talking here about the setup on the daily chart, which only adds the credibility (setups on daily weekly charts are always the most powerful).

Since the beginning of September, the AUDUSD was creating the Inverse Head and Shoulders, so a strong bullish reversal formation. In our case, everything went according to the plan and on Friday, buyers managed to break the neckline (grey) of this structure. In the same time, that resistance was the 23,6% Fibonacci of the main yearly downtrend. The new week starts with a small pull-back, which is rather typical for this kind of a price action. Simply – broken resistance is being tested as a support.

Price closing a day above the grey area will be a strong signal to buy. On the other hand, price coming back deep below the neckline will mean a false breakout and can crash the bullish dreams for a long time. There is one rule with trading the false breakouts – you do not mess with them.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis