AUD/USD is currently navigating a mix of short-term bullish signals and longer-term bearish risks. After giving back most of Friday's gains, the pair slipped back below the 10-day moving average, though shorter-term technicals still point to upside potential. Since the start of July, AUD/USD has been consolidating its recent rally, with a bull flag continuation pattern taking shape on the daily charts. If this pattern is completed, it could propel the pair toward the 0.7150–0.7200 zone.

However, this bullish scenario is closely tied to next week's Federal Reserve meeting—if the Fed holds rates steady or adopts a less hawkish tone than markets currently anticipate, the flag pattern may complete, allowing the rally from the June 29 low to resume.

Even if AUD/USD reaches the 0.7150–0.7200 target, bulls would face a critical test, as that zone represents significant resistance. Should the rally stall and then consolidate or retreat from that level, it could mark the formation of the right shoulder in a much larger head and shoulders topping pattern. Given the scale involved, this would be an unusually large pattern.

Should this major topping formation complete with a break of the neckline, it would signal the potential for a substantial decline—potentially pulling AUD/USD all the way down toward its November 2025 monthly low.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)