The AUD/USD pair had a bullish session on Monday as the 1.04 handle was overcome again. Unlike the last several sessions, we not only close above 1.04, but we also managed close towards the top of the daily range. This can often be the first signs of a bullish move.
However, it should also be stated that the candle for last week was a shooting star, so we have not broken out of that range. Because of this, I am a little bit cautious about going long of this pair even though I know that 1.04 is the "middle line" of the previous consolidation area between the 1.02 level and the 1.06 level.
We currently see the 1.04 level as holding as a resistive barrier for the buyers in this market. Quite often, when you cannot reach the top from the bottom of the consolidation area, you will fail halfway through the range, only to turn around and fall through the bottom. This is normally the first sign of serious trouble. However, the Monday session does give me pause as I'm not ready to start shorting quite yet.
1.0380
Looking at this chart, I believe that the 1.0380 level would be crucial for sellers. If we get below that level, I believe that we will eventually reach for the 1.02 level, and I also am more comfortable with that particular trade. As a general rule, I tend to trade from the top down approach, which means that the higher time frames get more weight in my analysis. Obviously, with a bearish weekly chart, I am not too keen to go long of the Aussie dollar.
Also weighing upon any bullishness that I might see in this market is the fact that there are so many negative headlines right now. Ironically, if the "fiscal cliff” is fallen off of in the United States, it would actually strengthen the US dollar over the Australian dollar. This is of course because of the US Treasury markets.
With all things being said, I am actually still bearish of this pair. However, if we see a move above the top of Wednesday shooting star, I would have to go ahead and start buying at that point time. That is about 70 pips above where we are right now, so it is certainly possible. In the meantime, I will wait for one of these two mentioned that levels to be broken in order to get involved.