The AUD/USD pair fell during the session on Tuesday, slicing through the 0.95 level during the day. That is an area that begins a significant amount of support, but I do see that the support goes all the way down to the 0.9250 level, and as a result I don't think that the markets can be sold, even though it was a fairly bearish candle.
This market broke out above the 0.95 level, and has pulled back enough to test it. After all, one of the most basic moves in technical analysis is to break out above resistance, and then pullback later to test it for support. I think that's what's happening now, looks like it's going to start digging into a rather noisy area, which of course should show quite a bit of buying pressure.
Watch the gold markets.
Watch the gold markets if you want to see where the Australian dollar may end up. This is because the Australians export so much of the gold that the rest the world uses, plus the fact that the gold markets are highly sensitive to what the Federal Reserve does as far as quantitative easing is concerned. There is still the possibility that the Federal Reserve manages to taper off of quantitative easing, that of course would drive up the value of the dollar. However, I feel that it's more likely that the Federal Reserve will not be able to taper off of quantitative easing, and that should drive the price of gold higher. That in turn should drive demand for the Aussie dollar higher as well.
If we do manage to bounce from here, I fully expect to see this market test the parity level to the upside. It makes sense, because it is the next large round psychologically significant number, and although it is a major number, it has been sliced through several times. That being the case, I don't think the markets will be overly concerned about hitting that level, and will probably not only hit that level, but continue to drive much higher.
