The AUD/USD pair initially rallied during the Wednesday session, but as you can see the 1.02 level acted as enough resistance to push price back down. The resulting candle for the Wednesday session was a shooting star, and the fact that it is at the bottom of a significant selloff is of course a very bearish sign as well. The 1.02 level acting as resistance doesn't help the case for the buyers either, as it was one support, and this of course could show a significant push lower.
However, there is a little bit of hope for the buyers: There is a hammer from early March that formed a significant amount of support extending down to the 1.01 handle, and vaulting the Australian dollar up towards 1.06 before falling down to current levels. Because of this, I am not ready to start selling the Aussie dollar quite yet, as I can see a scenario where we could chop around and perhaps even still bounce.
1.01 will be crucial
For me, the 1.01 level will be crucial for this market. If we can get below that level on a daily close, I would not only start selling this market, but be selling it aggressively. I know that a lot of professional traders are not necessarily pro-Aussie at the moment, and this is especially true after the recent rate cut, although it was expected. The real concern would have been the very dovish central bank statement out of the Reserve Bank of Australia last week. It appears that the Australians are bit more dovish than the market anticipated, so selloff could be coming based upon that fact alone.
Nonetheless, risking your trading capital before the support level was broken down is risky at best. However, I am willing to admit that if we managed to break the top of the shooting star from the session on Wednesday, this is in and of itself a fairly strong signal, especially considering where it would be happening. So because of this I suggest that the next 48 hours will be very important in the Australian dollar, and determining its next move.
