The AUD/USD pair tried to rally during the session on Monday, but as you can see it lost most of its strength during the session. This candle ended up being a shooting star, which of course is a fairly negative candle overall. However, I do recognize the fact that once you get down to the 0.93 handle, you begin to see quite a bit of noise and support. Because of this, I feel that this pair will probably trap a lot of traders who are looking to start selling the Australian dollar.
I believe that the Australian dollar will be greatly influenced by the Reserve Bank of Australia and its interest rate decision today, but we also have to be realistic about it as the RBA is unlikely to do anything with the rate itself. That being said, the market will try to garner some type of intentions or forward look at the interest rate situation in Australia based upon comments and statements made after the announcement. In other words, it's all about expectations.
Massive noise underneath
I see a ton of noise underneath all the way down to the 0.8950 handle. Because of this, it's very difficult to short this pair at the moment, especially when you consider that it has actually broken out to the upside in the form of the move above the 0.93 handle. That being the case, I actually prefer to see this market go higher and break the top of the shooting star for the Monday candle in order to show extreme strength. Above there though, you can expect the 0.95 handle to be a bit of a problem as well, so we could very well find ourselves in a relatively tight situation over the next several weeks, especially if the RBA gives no real clear-cut indication of what they are thinking.
Nonetheless, I do think that there will be trading opportunities in this pair, but they will be of the short-term variety more than anything else. Having said that though, if we get above the 0.9550 handle, I would be very interested in holding a long position all the way up to the parity level.
