AUD/USD initially spiked during the session on Thursday in anticipation of some new program out of the ECB that should have amount to the printing of money. However, the announcement gave very little in terms of substance, and as such the hot money players simply bailed on the "risk on trade."
Obviously, being one of the favorites for expressing global appetite, the Australian dollar suffered as a result. In reality, one has to wonder whether or not the selling would've stopped if it weren't for the fact that nonfarm payroll is today. The truth is a lot of traders don't like to be in the markets ahead of that announcement, and as such a lot of times you get markets squaring off at the end of the Thursday session.
Triple shooting stars
The Thursday candle ended up being a shooting star, which of course makes this the third day in a row we've seen this candlestick formation. The fact that we manage to be an outside candlestick as well doesn't bode well for the Aussie dollar in the short term.
The reason I say short-term is that I still see this market has been in an up trending channel. We are simply at the top of it, so a pullback would've been expected to begin with. At the bottom of the channel we have the 1.03 level, and this could be very supportive based upon previous action. In fact, this is essentially what I am banking on going forward.
A break of the Thursday lows is of course a sell signal, but I think it is a short-term one at best. I will be selling it, but will be very quick to take profits once we get towards the bottom of the channel and show any signs of support. If we manage to break through the channel fairly cleanly, then I'm more than willing to hang onto this trade down to the parity level.
The truth is that the market is essentially a short-term market these days, so I really don't expect the move down to parity. On the other end of the equation, we could see a break of the highs for the session on Thursday. If that happens that is obviously very bullish and I would be long.