The AUD/USD pair shot straight up during the Thursday session as the ECB stated it would buy "unlimited" amount of bonds from troubled nations in that region. This got the "risk on" trade back into play, and that almost always benefits the Australian dollar.
We stopped right at the 1.03 resistance level however, and I suspect this is because of the employment numbers coming out of the United States later today. These numbers can move the market in massive ways, and as such it is difficult to think that a lot of people would have wanted to go long risk ahead of it.
The fact that the 1.03 level. The market cold in its tracks suggests to me that it was a simple short covering rally. In fact, if the jobs number comes out stronger than expected I think this pair will actually fall, which is somewhat counterintuitive to normal action.
1.03
I am using the 1.03 level as a bit of a "risk barometer" as it is a bit of a binary trade for me now. The four-hour chart did form a shooting star off of the 1.03 level, and I do think that perhaps we could see a bit of a selloff from this point. However, at the end of the Friday session I am more than willing to look at where we are on the chart and make my decision accordingly. I believe that if we are above the 1.03 level, then risk will be a good thing again and we should buy the Australian dollar.
However, if we manage to stay below the 1.03 level on Friday, I think that the "risk off" trade is more than likely come back into play and I am willing to sell this market because of it. I think the breaking below of the 1.03 level did mean something earlier this week, and unless this latest action by the European Central Bank is expected to solve the problem in Europe, I find it hard to believe that suddenly traders around the world are going to take on a lot more risk.