**AUD/USD Tests Double Top Neckline at 0.6500: Reversal Imminent?**
*Adapted from an article by Eno Eteng, FXDailyReport*
The AUD/USD currency pair has captured the attention of forex traders recently as it confronts a key technical barrier around the 0.6500 level. According to technical analysis, the pair now finds itself at a juncture where a double top reversal pattern may come into play, sparking speculation about a potential bearish move if support fails to hold.
## Current Price Action and Market Context
Since the beginning of the year, the Australian Dollar (AUD) has faced persistent headwinds. Macroeconomic forces are pressuring the currency, with the Federal Reserve’s hawkish outlook supporting the US Dollar while the Reserve Bank of Australia (RBA) remains cautious. Geopolitical factors such as concerns over China’s economic recovery have also contributed to risk aversion among traders, further pressuring the AUD.
On the daily chart, AUD/USD has oscillated within a range, only to recently lose bullish momentum and retreat toward the psychological 0.6500 mark. This is a critical level, as it aligns with the neckline of a double top chart pattern. The double top pattern is widely regarded as a bearish reversal signal when confirmed, making the situation particularly tense for both bulls and bears.
## Understanding the Double Top Pattern
A double top forms after a sustained uptrend when price action creates two peaks at a similar level separated by a trough. The neckline, drawn at the lowest point between these peaks, serves as the decisive support. If prices break below this neckline, it often foreshadows a shift to bearish sentiment.
Key characteristics of a double top pattern include:
– **Two prominent price peaks** at approximately the same level
– **A moderate trough** between the peaks
– **A clear neckline**, plotted at the low point between the peaks
Once price action breaks and closes below the neckline, a potential bearish move can unfold. The pattern’s projected target is typically calculated by measuring the height between the peaks and the neckline, then subtracting that value from the neckline to estimate the downward target.
## Technical Analysis: AUD/USD at the Crossroads
### Recent Chart Movements
– March and April 2024: AUD/USD staged a notable rebound, climbing toward 0.6650
– Failing to breach resistance, the pair swung lower
– The latest downswing has brought the price back to 0.6500, the critical neckline support
This 0.6500 support is under heavy scrutiny. The pair’s inability to hold above this level could confirm the double top reversal pattern, leading to a further decline.
### Key Support and Resistance Levels
For reference, traders are watching the following major levels:
– **Immediate resistance**: 0.6550 and 0.6600
– **Current support**: 0.6500 (double top neckline)
Read more on AUD/USD trading.