The AUD/USD pair broke out to the upside during the Tuesday session, breaking well above the top of the hammer that had formed for Monday. During the Monday candle, and the analysis thereafter, I suggested that perhaps we could continue to bounce around in overall consolidation. Without a doubt, I would say that the Australian dollar buyers have made their intentions known by the action that we have seen in the markets on Tuesday. However, there is a lot of noise above so I don’t necessarily think that we are going to break out for a longer-term move higher.
There are a lot of questions when it comes to the Australian dollar, mainly involving commodities. I don’t like commodities overall at the moment, but if we do see the US dollar continue to soften, I think we could be witnessing the beginning of an overall shift in attitude. However, I don’t believe that the economic conditions out there warrant buying a lot of risky assets such as the Aussie dollar.
Buying short-term pullbacks
I believe at this point in time though, the best thing that you can do with the candle like this is to buy short-term pullbacks and show signs of support. Ultimately, I think we will try to rally towards the 0.80 level, but it will take something special to break out to a fresh, new high. The last time we broke through there, we had a very forceful candle higher, and then fell flat on our backs. With that being said, I think a lot of people will continue to fear holding onto the Australian dollar for any real length of time, and as a result I think volatility will continue.
I don’t really have any interest in selling at the moment though, I think this bounce will provide a clear enough selling signal sooner or later. As far as that is concerned, the higher we go, the more interested I am in any type of bearish formations that forms below the 0.81 level.
