The AUD/USD pair had a fairly neutral session for the Monday trading day. This pair had recently smashed through a fairly resistive level in the form of the 1.05 handle, and the previous candles form last week that formed shooting stars had me think this pair was going to fall.
However, it hasn’t and I have to admit that I am fairly impressed. The candle for the Monday session however, looks like yet another shooting star. This of course doesn’t look good for the bulls in this market, and as a result I am now looking to see what can happen to the downside.
However, this market has obviously been very strong, so selling isn’t’ my preferred course of action. Because of this, sometimes we are rewarded for recognizing when the market is possibly going to “go on sale”, which is exactly how I feel about this pair at the moment.
Channel
The market looks to be channel bound to me at this point, and the fact that we are running into resistance at this point isn’t a big surprise quite frankly, as it is at the top of the channel. The market has recently smashed through a massive resistance area, and a bit of exhaustion could be in order for the pair.
The 1.03 level below could also be supportive as it was resistive previously. The 1.03 is just below the bottom of the channel bottom, and it should act as a bit of a buffer for the support as well. It is because of this that I think that the 1.03 level will have to be broken in order for the sellers to catch any momentum.
If we break higher and above the Monday highs we could see an impulsive move higher. I would also be willing to buy this as I have seen enough of these moves to know they can be quite profitable. However, the most likely move will be a pullback to the bottom of the channel and a long position based upon that support. However, there is a rate decision in Australia today, but very little is expected out of that. (Shouldn’t have a major effect on the market.)