The Aussie had a somewhat strong week but has now run into a very interesting technical pattern that could lead to an explosive move.

For a while now, the AUD/USD hasn’t been a little unsure of what direction it wants to go.

The bulls would suggest that all the RBA information is already price in. That means that even if we do see a further cut to interest rates in February 2020, the AUD might appreciate.

The bears, on the other hand, would make the argument, that given the RBA is still cutting and therefore dovish, we should expect some more downside.

As such, the Aussie has found a little bit of equilibrium, which is starting to look a bit like a triangle pattern as we can see from the chart below.

When we get this type of pattern, it obviously comes with a great deal of volatility contraction. And volatility contraction is generally followed by volatility expansion, which would mean a big move could be on the cards.

So far price has found its way above 0.6800 and is holding in the range between, 0.6860 and 0.6820.

We are also seeing that range narrowing in the triangle formation. So if we get a breakthrough either one of those levels, there is a good chance of a big move.

There have been some positive catalysts lately for the risk-on trade, including the strong NFP number on Friday and positive talks between the US and China.

At the same time, the calendar is quite thin in terms of data this week for the AUD so I feel the technicals will be important.

I’ll be watching those two levels very closely and when the break comes, will be looking to hit into a momentum play in that direction.