The AUD/USD pair fell during the course of the day on Wednesday, testing the 0.81 level. That being the case, it appears the market is ready to continue consolidating which I think truthfully runs from 0.80 on the bottom to the 0.83 region on the top. The 0.80 level offers a massive amount of support as it is a long-term support area. In fact, that region was a massive resistance barrier for 16 years, and that of course will create quite a bit of market memory.
Looking forward, I would anticipate seen some type of supportive candle that we can buy, but we obviously do not have it quite yet. Once that happens though, I am willing to start going long for a short-term move back to the 0.8250 region. The gold markets are starting to show a little bit of strength, so perhaps that could be the reason that we get a bounce as well.
Consolidation after a long move lower.
I would anticipate seeing more consolidation the market needs to take a bit of a breather after falling so hard. Ultimately though, if we do break down below the 0.80 level, that would be disastrous for the Australian dollar. The last oversold levels during the financial crisis which of course would put a very ominous tone in the market.
If we did break down below there I think that the market would probably head to the 0.75 level, which of course would take a while to get to in my opinion. However, I do recognize that breakdown would be very significant as it is an area that I think most traders believe will hold.
On the other hand, if we did break above the 0.83 level, I think we would then head to the 0.85 level where see much more in the way of resistance. That’s probably what should happen simply because the market sold off so drastically before, but at this point time you have to play a bit of “small ball” while we wait for more significant moves to appear.
