A head-and-shoulders forms in AUD/USD after five straight weeks of losses

The RBA decision is about five hours away and Australian dollar bulls could certainly use a lifeline. Unfortunately, I don’t see many paths today that. No change in the 4.35% cash target is coming today and I can’t imagine some kind of shift back to rate hikes.

The market is pricing in fractional chance of a cut today and that rises to 50/50 by June. Even with a pushback against cuts, the market will easily dismiss it because so much could change between now and the June 18 meeting.

The best bet for the Australian dollar her is some kind of shift in China, which is something that I would argue is warranted. The problem is that it’s been warranted for awhile and Beijing is asleep at the wheel. Holidays effectively start on Friday and continue for a week in China so it’s now or we’re waiting until mid-month at best.

Technically, the Dec-Jan lows initially gave way two weeks ago but it looked like it could be a false break. However the latest leg of USD strength has broken the double bottom again and teed up a nice head-and-shoulders pattern that points to 0.6200.

The October low near 0.6260 should offer some support but it’s not a pretty picture.

This article was written by Adam Button at www.forexlive.com. Source