By: Christopher Lewis
The AUD/USD pair rose on optimism out of Athens when the austerity measures passed during the early hours of the Monday session. The pair is very risk-sensitive and as a result popped originally. However, as time went on, there were some telling signs as the rally faded and the bulls retreated.
The 1.08 level has recently been resistive, and the failure of the pair to rally past that level on Monday certainly will have many people asking questions about the risk appetite of the markets. It is as if the markets are finally saying that they don’t’ trust the Greeks to follow through. There is a certain amount of wisdom in this thinking as the elections in April will certainly see many of the people in Parliament that voted for austerity unemployed. It is easy to see how people that are sympathetic to breaking from austerity will more than likely end up being elected. It is only a matter of time before the Greek default.
The candle for the session on Monday formed a shooting star the shows just how bearish the day ended up being towards the end. The pair saw much of its losses late in the session, as even the normally bullish Americans sold off the Aussie.
1.08 looms large
The 1.08 level has repelled the bulls after giving way just a few sessions ago. The pair looks heavy at this point, and the risk rally seems to be weak at best. The pair will more than likely find itself being shunned, but there are several levels, mainly at handles, that could provide support for this pair. The 1.08 simply must be overcome in order for the bullish momentum to continue.
The levels I see below that could offer support include the 1.06, 1.05 and most certainly the 1.04 level. The 1.04 level must hold for the bulls to continue pushing the pair higher, and I expect that the buyers will step into the market after a fall. The pair does however; offer a real shot at falling in the short term. Depending on your time horizon, this could be a short-term selling opportunity on the break of the lows from Monday. If you are more apt to trade longer time frames, I believe you will get a chance to buy at one of those levels on a daily candle in the next few sessions.