By: Christopher Lewis

AUD/USD has been extremely bullish as of late, in a perfect storm of sorts. The pair features a currency that exports commodities to the rest of the world, and most importantly – China. The Chinese economy is heading for a slowdown, but a minor one as far as the market can tell. Keep in mind that a “slowdown” in China means a growth rate of something like 7%.

The Federal Reserve has decided to keep interest rates in the United States at almost zero until the end of 2014, and this shall ensure that the AUD/USD swap shall continue to pay the trader to hold this pair long for the foreseeable future. With these two things in mind, and the fact that the commodity prices are set to rise in general, and the Aussie is a currency that traders want to own in general.

The recent run has been impressive, but all healthy markets need pullbacks, and this one hasn’t really seen that yet. However, it looks as if we may be getting ready to finally see one that should allow anyone that has missed the rally into the markets to continue to push prices higher.

Shooting star

The 1.08 area was a known resistance level previously, and I suggested a while back that we could see a bit of a struggle at this level since the pair has been almost parabolic in its relentless march north. The Wednesday candle is a shooting star at this level, and as such I think we are about to finally get the pullback in this pair that so many have been waiting for.

The nice thing about the pair is that the handles are all significant all the way down to the 1.04 level, which of course was the top of the triangle that started all of this recent bullishness. As you may recall, that triangle measures a move up to 1.12, and I still stand by that prediction over the longer term.

The 1.07, 1.06, 1.05 and of course the 1.04 levels are all capable of producing support on a pullback in the Aussie, and these are all areas that I am looking for supportive action from which to buy this pair. I will not sell it as I don’t like the risk to reward propositions going forward. In the meantime, I will hope that the pair pulls back nicely so I can bargain hunt.