The AUD/USD pair had a very negative day on Wednesday, but remains above the 1.04 level that showed so much support recently. The hammer from Monday still represents in my opinion a significant amount of support in this market, and as a result I'm not quite ready to start selling it. Besides, let's be honest here - there are plenty of minor support areas all the way down to the 1.02 level.
However, I have to admit that the candle for the Wednesday session is pretty ugly. It is because of this I feel that we are necessarily policy massive bullishness come back into the marketplace, rather we will see a bit of consolidation between 1.04 and just below the 1.05 handle. That being said, the Australian dollar has an active quite "right" for the last couple weeks. With that being the case, I am a bit leery of going long at this point.
Undervalued?
I cannot help but think that the Australian dollar may be a bit undervalued at this point. After all, its cousin across the Tasman the New Zealand dollar has shown quite a bit more resilience. With that being the case, and the fact that the two currencies tend to move hand-in-hand, I am a bit suspicious of all this weakness.
Is possibly because there are quite a few people starting to question the validity Chinese economic numbers. Australia is quite often drawn as a way to play the Chinese economy, and as a result it is probably catching a little bit of heat for those concerned. Nonetheless, the gold markets are starting to take off again and the Federal Reserve look like it's ready to start printing some more currency out there, so the Australian dollar should continue to attract traders over the longer term.
This market looks like one that is ready to offer buying opportunities over the next couple of weeks. I will be buying only, and not willing to sell until we break well below the 1.02 level, as I feel that the bit of a "floor" in this market.