The AUD/USD pair rose during the session on Tuesday, breaking the top of the hammer from Monday. This is of course a buy signal, but I ignored it simply because I knew that the 0.90 level would more than likely cause some type of resistance. Granted, the daily candle looks very strong in this pair right now and it's very likely that we are going to go through the 0.90 handle, but I see so much noise between here and the 0.93 handle that I am very hesitant to go long of this pair until we break well above the 0.93 handle.
Resistive candles between here and there will be sold by me as I believe the downtrend should continue. After all, Australia is very dependent on the Asian economies for its exports, and those are necessarily roaring at the moment. That being the case, the Australian dollar should be weak, as it has been lately, and should be going into the future. This is more or less a "dead cat bounce" according to my estimation, and as a result I will treat it as such.
Watch Asia, it steers Australia
Until the Asian economies pick up, I just don't see how the Australian dollar can be strong long-term. You have to ask yourself the question at this moment in time, would you rather buy it here, or sell it much higher and hang onto the trade for longer? I know how I feel, and that's exactly how I'm going to trade, sell rallies that show signs of weakness between here and the 0.93 handle. On top of that, the 0.95 handle should be just as resistance, so the Australian dollar certainly has a lot of work to do if it will prove itself to be strong again.
Selling rallies will be the way to go but if we don't get that we could see a return to the lows, and a break of the bottom of the Monday hammer would be a massively bearish signal for this pair, and have me aggressively short at that point.