The AUD/USD has been a source of great confusion lately. After all, the Australian dollar has underperformed just about everything, and many of my compatriots simply have no idea as to what has caused all of this weakness. However, there is a massive move in the EUR/AUD pair that I believe is currently affecting how this market moves.
That being said, the move of the last two days makes a little bit more sense. Weaker than expected employment numbers out of New Zealand had a bit of a sympathy affect and the Australian dollar on Wednesday, and the Thursday candle was simply a reaction to the "risk off" trade that came into play. Because of this, I believe that this pair will continue lower, but we are coming to an area that could cause serious trouble for the sellers.
The market has been pretty bearish lately, but when you look at the longer-term charts you begin to see that the 1.02 level was simply that bottom of a larger consolidation area with highs at the 1.06 resistance level. With this in mind, I believe that there is a nice bonding opportunity coming our way.
Long-term uptrend
The Australian dollar has been in a long-term uptrend for quite some time now. Also, you have to realize of the Australian dollar is one of the favored ways to play bullishness in the markets by Forex traders. Certainly, they have not forgotten this over the last couple weeks. With this being the case, as the Federal Reserve continues to pump more money into the currency markets, I believe that this market will continue going higher over the long run as the Dollar gets devalued.
For my strategy, I am going to wait and see if we get some type of supportive candle on either Friday or Monday, as we approach the 1.02 level. I will be more than willing to buy down that area, as the risk reward ratio is definitely in my favorite that point. I believe that a return to the 1.04 level would be reasonable to expect, and if you are truly patient enough you may even see the 1.06 handle.