Chart patterns provide a good way to figure out the direction of the market. A good chart pattern offers the following clues to the trader:

• Hint of market direction
• Criteria for confirmation
• Early trade signal

All in all, its qualities are predictive, pre-emptive.

Let’s look at Aussie this 2 weeks to see if clues were left for traders.

From left to right:

1. Week 49 printed a ‘Head and Shoulder’ formation (solid blue line); this is a strong hint of a bearish reversal.
2. Neckline (A) provided the confirmation of the H & S formation which acted as a pullback resistance at point (1).
3. By Friday 04 December, a more obvious H & S formation was formed with the adoption of the dotted dark blue line;  confirmation provided by neckline (B).
4. Tuesday and Wednesday of Week 50 printed a Double Bottom formation; confirmation came on Thursday with the break of the horizontal resistance (C).
5. Rather than play ‘breakout’, point (3) was a very good throwback level to go long at support.

What to look out for next week?

A horizontal channel reveals levels support at [E] that has broken on the down side. So the opening move of Week 51 could be a test of resistance at [E] and support at [F]. Price takes the path of least resistance so the integrity of both levels may provide clues for the middle of the week to come.

Aussie Dollar chart patterns