The AUD/USD pair fell during the session on Tuesday as the "risk off" trade came back into play. Most of this would've been predicated upon the elections in Italy, and have very little to do with Australia itself. However, as the US dollar has climbed against almost all other currencies, it would be no different against the Aussie.
Looking at this chart, you can see that the 1.02 level is significant support, and in fact has been the bottom of a much larger consolidation rectangle. This rectangle extends all the way to the 1.06 handle, and because of this value investors would have been buying the Aussie down at this level. 1.02 has been very strong as support, so the fact that the level didn't break down right away is no surprise. In fact, you can see that buying started right at the handle.
Going forward, it looks like we could get a little bit of a bounce from here and perhaps reenter the consolidation area. With the way the chart looks though, I find it very difficult to think that this pair is going to get above the 1.0370 handle any time soon.
Look out below?
If we managed to break down below the 1.02 handle, this could be a signal that we are heading to parity. That move I believe would happen very quickly, and would be absolutely brutal. Looking at this chart, I cannot help but think that it is only a matter of time before you break down, but the bounce could offer a nice selling opportunity. I know that many pundits on there are very against the Aussie right now, and it seems to me that the markets have been "whistling past the graveyard" for some time now. We never know when the next shoe to drop is, and the Italian elections prove that.
Until we are below 1.02, I am not ready to start selling this pair though. I think of the bounce could last for a while, and we could go sideways in the meantime. However, the most important level you need to pay attention to at this point time is the 1.02 level, and any daily close below that has me selling aggressively.