The Australian dollar had a pretty wild day during the Thursday session. This makes sense, as a lot of people are trying to figure out which direction the worldwide economy is going. With so many conflicting signals, although a majority of them are negative, it makes sense of the Australian dollar will suffer. After all, it is one of the favored currencies by the Forex market to express risk appetite.
Because of this, this pair should remain volatile for the foreseeable future. In fact, I haven't been trading it is much as I used to. Currently we have a situation that every headline is moving the market dramatically. A perfect example of that is the Thursday candle. You can see the range was fairly wide for the session, and at the end of the day not much was decided.
Parity holds
During the Thursday session, we did see an attempt to break down below the parity level. However, at the end of the day it held as support, and is even backed up by the Monday hammer as well. With this in mind, it is going to be difficult to break this pair down. However, the worldwide situation does not favor a lot of "risk on" trading. With this being said, I suspect this pair is going to be very choppy and very short-term driven.
Obviously, a breakdown of the lows from the Monday hammer would be a strong sell signal on this pair, but I would wait until after a daily close in order to take that trade. As you can see on the Thursday candle, there was a point in time during the day that it looked like this pair was going to skyrocket, and then another point in the day that liquidity was going to fall apart. A daily close, although not 100% accurate, will protect you in the sense that it shows a sense of finality.
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This pair could be rather dangerous to trade in the short term, but I believe that the 1.02 level to the upside is the obvious buy signal that we want to see if you're going to go long. The breakdown and closing below Monday's hammer would be a pretty strong sell signal as well. It is because of the recent volatility that I am waiting for one of these levels to be broken on a daily close in order to get involved at all. Sometimes, you are paid to wait and this may be one of those situations.