The AUD/USD pair fell during most of the session on Tuesday, as you can see chasing towards the 0.93 level. Having said that, we saw enough support come into the marketplace to form a nice looking hammer, that hammer was formed just after a shooting star on Monday, and that being the case I find this market looks potentially dangerous. Unfortunately, I have seen through my years of training traders that they see a hammer or a shooting star and blindly jump into the market.
Unfortunately, this hammer could be what I call a "suckers hammer", which is a hammer that on its own looks very good, that is formed just below a significant resistance area. Don't believe me that there significant resistance above? All you have to do is look at the fact that we gapped lower on the open this weekend, and the fact that the 0.95 level is of course a large round psychologically significant number. With that being the case, of course the market could move higher in buying could work out, but this isn't playing the odds in your favor. Your job is a trader is to simply make more than you lose. By far, I have found over the years of the best way to do that is to simply play higher percentage trades. Unfortunately, I can think of several people I know personally that will be buying this hammer, and they may be various prized on how it turns out.
Pay attention to China
Weaker than expected Chinese numbers have been absolutely killing the Australian dollar. Australia is the supermarket for all things that the Chinese need to build stuff, and as a result tends to be highly leveraged to the Chinese economy. On top of that, there is talk that the Oil Bank of Australia is looking into cutting rates going forward. If that's the case, this obviously will kill off some of the interest rate differential that you get paid for carrying the Aussie. All things being the same, I fully expect to see resistance somewhere near 0.95 or so, it will be selling that resistant candle if and when it prints.
