I analyzed the low volatility on AUD/USD on the 30th of April and expected strong AUD after it breached above the upper Bollinger band. Price sometimes breaks the Bollinger band but suddenly reverses and continues in the opposite direction. This is called a “head fake”. A bullish head fake occurs when price breaks above the upper band and fails to expand the volatility on the upside.
On the 30th of April, AUD/USD breached above the minor high at 1.0458 but failed to continue higher. Currency pair reversed in the following days and fell below the 200 day moving average at 1.0378. Head fake is followed by another breach of the Bollinger band but this time price breached the lower Bollinger band. Latest weakness suggests an emerging downtrend that favors USD in the short-term. Volatility is likely to increase on the downside. With a protective stop-loss at 1.0350, we should watch AUD with a bearish outlook.
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