Inflation Battle Has AU Ready To Flip On It's "Head"

Jun 28

Price on AUDUSD may be creating a textbook reversal called a Head and Shoulders pattern on the Weekly chart and the Battle of Future Rates & Inflation my be the fundamental catalyst for such a Bearish Reversal to finish forming, leading to price breaking through the floor, lets break it down!!

We can see that AUDUSD has been trading sideways since the beginning of 2026 but the most recent decline in price comes from a Higher High with price now just above a Support level @ .6866 - .68334, found between the two peaks.

If price is once again supported in this area, this would begin the final "Shoulder" of the Reversal Pattern and a couple things we will want to watch during its formation as price moves up:

- Should generate the least amount of Volume of the 3 Peaks in price

- Lower High of the Bearish Divergence in the RSI

- Continued decline in MACD

Once price is rejected from the Resistance level where the "Left Shoulder" is, this will confirm the beginning of the drop of the "Right Shoulder" where then we will see price, after forming a Lower High, potentially push back down to the "Neckline" or Support of the Pattern to then possibly fall further!

Fundamentally, a lot of things could be supporting this outlook with:

- Inflation falling for AUD
(4.2% -> 4%)

- Inflation rising for USD
(3.8% -> 4.2%)

With both the RBA and Federal Reserve making the decision to Hold Interest Rates this month, these two different readouts could me totally different paths being taken by the Central Banks.

- With inflation falling, RBA will be looking to Cut Interest Rates, weakening the AUD.

- With inflation rising, Fed will be looking to Rise Interest Rates, strengthening the USD.

Lets see how it plays out and to stay up to date..

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Jul 6

Note

We can see scaling down to the 8Hr Chart, AUDUSD has formed what looks to be a Inverse Head and Shoulders pattern and price starting this week, has delivered a Retest of the Breakout of this Bullish Reversal pattern!

With this pattern forming after touching the suspected "Neckline" of the Head and Shoulders pattern forming on the Weekly chart, we can safely assume we may be looking at the beginnings of the creation of the "Right Shoulder" or next Lower High!