The AUD/USD pair has had a nice bounce as of late, and as such I have been waiting for a chance to sell it. With the price action on Thursday, I thought that I had a nice signal. However, the Friday action was a reversal candle in the form of a hammer, and this will have the bears a bit concerned, myself included.
I have to admit that the move on Friday caught me a bit off guard, as the market covered any short positions ahead of the weekend in anticipation of a bailout move by the EU for Spanish banks. This prompted a “risk on” rally, as the traders around the world anticipated a Monday morning “pop”.
The fact that the markets seem to be leaning in this direction suggests that if the EU doesn’t produce some kind of bailout announcement over the weekend, things could get ugly in a very quick amount of time. Because of this, I think it will happen – but I have no idea as to the size and scope.
Conflicting candles
The candles over the last 48 hours have conflicted each other, and this shows that there is a lot of uncertainty in the markets at the moment. This makes sense as the participants are basically relying on the EU leaders to pull it together, something they haven’t been able to do overall. Also, there are the problems well beyond the Spanish banks out there, and this is a point the bears will more than likely try to drive home if there is some kind of pop.
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The technical set up looks as if the bears are running out of steam at the moment though. A pop on Monday is very possible, and a breaking of the top of the shooting star on Thursday will be a strong sign for the bulls if it comes. This would lead to the 50% Fibonacci just above, and then to 1.02 or so. For myself, I am looking to fade any rallies than come on the first weak candle that appears on a daily time frame as the troubles in Europe are many.