AUD/USD Technical Analysis August 16

Christopher Lewis

AUD/USD fell during much of the session as the "risk off" trade came back into play during the Wednesday session. However, by the end of the trading day we saw the Australian dollar bounce in order to form a hammer at the vicinity of 1.05 as a very positive sign.

AUD/USD Daily Technical Chart

Looking forward, as long as the markets fairly quiet the Australian dollar should continue to climb overall. We have been in an upward channel over the last couple of months, and it appears that recently when we ran into the resistance line we only went sideways instead of pulling back. This is a very strong sign as it shows there is true pressure underneath this pair.

The hammer at the large psychological round number is of course very interesting to me as I can see we are in an obvious uptrend. The 1.06 level above could offer resistance, but I think in the long run we will see this pair make an attempt to reach the 1.08 level, and perhaps even the 1.10 level. This may seem a bit extreme in a cautious type of environment, but the truth is that the world is searching for yield right now, and until the German rulings on the constitutionality of the European agreements on September 12, there will be a bit of quiet in the markets. This is exactly what a nice carry trade needs.

Hammer at support

One of the most consistently profitable trades is to buy a currency pair that has formed a hammer at support that is also in a nice uptrend. As you know, trends can run in one direction forever, and the simple pullbacks are just ways to get involved for traders who have missed out on the main move. I believe this is what we're seeing right now, and as such there are plenty of traders out there aware of this fact.

Looking forward, a break of the hammer has me buying this pair but expecting a little bit of trouble 1.06 or so. Nonetheless, I think that we do eventually go to 1.08 and maybe even 1.10 if we get a nice run and possible Federal Reserve easing. As for selling this pair, I have no interest in till we are well below the 1.03 mark.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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