AUDUSD might be in for a long-term reversal from its previous uptrend, as a complex head and shoulders can be seen on its 4-hour time frame. Price is currently testing the neckline near the .7150 minor psychological level, with a breakdown likely to push the pair lower by an additional 200 pips or the same height as the chart formation.

Both stochastic and RSI are coming from middle ground and turning lower, indicating weak bearish pressure. Still, if sellers are able to stay in control, a downside break could take place sooner or later.

However, the 100 SMA is above the 200 SMA and moving farther away, indicating that bullish momentum is present. In that case, AUDUSD might still be able to bounce off the current support area to the next ceiling at .7250.

Event risks for this trade setup include the FOMC interest rate statement during which the Fed is expected to hike interest rates. This scenario has been priced in for a long time already, which means that there’s a strong chance for disappointment and profit-taking.

Fed officials are likely to reiterate that their tightening process will be a slow and gradual one, downplaying market expectations of consecutive rate hikes next year. Aside from that, Fed head Yellen could reiterate that they can still undo their tightening moves if necessary.

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There are no major event risks lined up from the Australian economy, which means that commodity price movements might play a key role in pushing AUDUSD around for the rest of the week.

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