By: Christopher Lewis
The AUD/USD pair plummeted during the session on Tuesday as the Reserve Bank of Australia cuts rates by .50%, twice as much as the market anticipated. Because of this, the reaction was almost immediate as the traders around the world had to adjust to this reality.
The still yields 3.75% though, so the positive carry in this pair should continue to attract investors. The pair is one of the highest yielding ones as far as the major currencies go, and as a result will more than likely have somewhat of a natural bid under it.
The fall was dramatic, but it has to be said that the pair closed at roughly the same spot it initially fell to. This suggests to me that there is only limited downside in this pair. The fact that it just “sat there” suggests that the weak hands have been flushed out of the market, and the longer term big money players will step up going forward.
Consolidation
The market looks as if it is trying to continue the consolidation that we have seen lately, even with this long red candle. The 1.03 level has held as support, and as a result I think that we will more than likely see a move higher soon. This isn’t necessarily the best commodity pair to play from the bullish side at the moment, so in reality I am more likely to go long the Kiwi dollar than this pair. However, the real tell will be if the AUD/NZD pair rises or falls. The “winner” in that pair should be all rights are stronger against the Dollar.
.png "AUDUSD Daily 5212")
The 200 day exponential average is just above, so there may be some dynamic resistance there. The recent price action almost looks like it is trying to form a bearish flag, and with this Friday bringing the Non-Farm Payroll release; there could be a sideways grind until then. With this being said, this pair could be a mover on Friday, and I am willing to sell a break of the lows, or a daily close above the 200 day EMA going forward.