The AUD/USD pair rose during the session on Friday, mainly in response to the nonfarm payroll number that was weaker than anticipated out of the United States. The theory being that the Federal Reserve could not taper off of quantitative easing anytime soon, and this of course weakened the US dollar. However, you can see that I have included a daily chart that is relatively zoomed out in order to show you just how negative the trend has been in this pair. Granted, one thing that does catch my attention is that we could be entering the "accumulation phase", and that of course has to be paid attention to.
Although I am very bearish of this pair, I do have a spot on this chart that tells me it's time to start buying. This area is the 0.93 handle, because I believe that that point in time the yellow rectangle on the chart is no longer consolidation in a downtrend, but rather the aforementioned accumulation phase. Accumulation is simply when the "smart money" is starting to buy a financial instrument before it goes higher. If we break out of the consolidation area, I believe at that point in time the 0.90 level will have done its job in supporting the Australian dollar.
The next few weeks should be vital
If the Federal Reserve does in fact decide to go ahead and taper off of quantitative easing, that will strengthen the US dollar drastically. At this point, the Australian dollar is one of the weakest performing currencies that I track. This should only continue the downtrend, and send this market down to as low as 0.85. However, I also think that a breakout to the upside could be a reaction to the Federal Reserve backpedaling and not tapering. If that's the case, I would expect that gold markets would skyrocket, and then certainly would help the Australians.
On top of that, I believe that the US dollar would sink anyways, so it would make sense that we would enter a corrective phase in this market. In the meantime, I am selling resistive looking candles as I believe that the market is still heavily positioned to the downside. However, if we do get that daily close above the 0.93 handle, I am more than willing to start buying.
