The AUD/USD pair fell during the session on Tuesday, which of course is a much of a surprise considering that the Reserve Bank of Australia cut rates to the 2.75% level. However, this market had an interesting reaction as not only did a breakdown, but it didn't break down significantly. Because of this, I feel that the support below must be fairly strong.
As you can see, back in early March we had fallen below the 1.02 handle previously, but bounced off of the 1.01 handle back into form a hammer which of course was the beginning of the move back to the highs again. After all, this market has been stuck between 1.02, and the 1.06 handles. I think that the 1.01 handle is essentially an extension of the support level at the 1.02 level, and because of that I feel that a breakdown at this point time although possible, is probably less likely than most people think.
The gold markets may be holding up the Aussie as well
The gold markets have been bouncing around near the $1450 level, and as a result we are well off of the bottom from the massive selloff that we saw a couple of weeks back. With that being the case, the correlation of gold and the Australian dollar may in fact be part of the buoyancy in this market. However, I look at this chart and do recognize the fact that a bullish move from here would be very difficult to do, but if you are willing to hang onto the trade you may be rewarded for your patience.
As far as selling is concerned, of course I need to see that break down below the 1.01 handle on a daily chart. This would have to be a close for the day, and as a result this can keep you out of trouble as it helps eliminate “false breakouts”, or at least as good as you can. Keep an eye on gold though, if we start to breakout and especially if we get above the $1500 level, this pair will start moving much higher.
