AUD/USD struggles with daily resistance, H&S in focus
- AUD/USD is testing critical daily resistance within the H&S formation.
- US dollar back under pressure as equities bounce and US yields slide.
At the time of writing, AUD/USD is trading higher by 0.57% following a rally from a low of 0.7716 to a high of 0.7781.
The market is risk-on as US equities bounced and government bond yields fell on Thursday after weekly US Jobless Claims declined to the lowest level in 14 months.
Claims for unemployment benefits dropped by 34,000 to 444,000 during the week ended May 15, the lowest level since March 2020 and also lagging the 450,000 market consensus.
Nevertheless, the dollar lost ground on Thursday, hovering just above a multi-month low, retracing the gains made following Wednesday's bounce prompted by the release of the hawkish surprise in the US Federal Reserve meeting minutes.
The fly in the ointment for the dollar bears came when several policymakers said a discussion about reducing the pace of asset purchases would be appropriate "at some point" if the US economic recovery continues to gain momentum.
This was in contrast to the repeated Fed reassurances that it was too soon to tighten its accommodative policy or talk about tapering.
The mantra at the Fed had been that spikes in prices will not morph into longer-term inflation.
However, we have seen a reversal in the greenback weighed by yields and the Aussie is riding the mixed employment report higher.
Although employment unexpectedly dropped by 30.6K, this was met by a rise in full-time employment and a drop in the unemployment rate.
AUD/USD tracked higher in the hours after the labour report, in line with the broad-based softening in the USD.
AUD/USD technical analysis
Meanwhile, from a daily perspective, the outlook is somewhat bearish on a break of the ascending trendline support and below the head and shoulders neckline a follows:
A break of the current resistance would be a meanwhile bullish prospect.
However, the H&S formation is compelling as is the current test of the 50% ad 61.8% Fibonaccis that has a confluence with the resistance.
Failures here will open the risk of a test of the neckline and confluence with the dynamic support.
Author
Ross J Burland
FXStreet
Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.
