By: DailyForex.com
AUD/USD had an interesting session as the market tried to break down to the 1.03 level on Wednesday but failed. The bounce in the action formed a hammer, and because of this I am getting bullish short-term of this pair. (It is a very supportive candle, and at the right place for me to be interested.)
The 1.03 level now looks as if it will continue to support the market in the short-term, and this should make selling this pair a fool’s errand. The fact is that the gold markets look healthy, and this in turn seems to make the Aussie look healthy. This correlation continues fairly unabated, and as long as that is the case, it is hard to short this pair in general.
1.03 must hold
The 1.03 level is now my “line in the sand” as far as being long of this pair. The area is essentially where I make the decision whether or not we are in an uptrend or a downtrend. As long as we are above that marker, I will favor the upside in my trades and will be very hesitant in selling this pair. Naturally, when I am below this area I am looking to sell this pair at the moment.
The Federal Reserve has expanded its monetary policy recently, and this should support commodities on the whole. This of course will push money to look for more investments that offer some kind of yield. This will of course include higher yielding currencies such as the Australian dollar. However, we must also acknowledge that the Reserve Bank of Australia is expected to cut rates in the latter months of the year and this could weigh upon the bullishness of this market.
This essentially sets us up for a consolidative market between the 1.03 and 1.06 levels in the near term. This market won’t be an easy one because of the volatility, but the boundaries are quite clear – and this lets us know where we need to look in the long term as well.