AUD/USD fell originally during the Wednesday session as the “risk off” trade came back again. This makes perfect sense as the rally from Tuesday had to be reclaimed. (The markets are extremely volatile after all.) The Aussie is very risk sensitive on the whole, and as the markets felt better about things in general during the US session, the Aussie got a bit of a bid.
The area just above is the start of the 1.04 to 1.05 resistance area. This area is more than likely going to be very strong, and should provide a few problems for the bulls in this pair. However, the daily candle for Wednesday session look like a hammer, and could signal another attempt at breaking higher. If this is the case, the pair will have to close above the 1.05 level on the daily chart to have us interested in taking a chance on it. Until that level is cleared, buying is simply asking for trouble at this point.
Headlines will continue to pose a threat to this pair, and as long as there is potential for bad news out of Europe, the pair will climb a “wall of worry” as they say. The pair looks supportive down towards the 0.99 to parity zone, and the gap from the middle of November should continue to support as well. It is worth noting however, that the gap wasn’t filled – something that almost always happens in Forex. This is another reason we aren’t gung ho for the pair at the moment.
The breaking lower of the hammer from the Wednesday session would signal weakness, but more than likely it would simply be a return to the parity level, but does offer a few hundred pips to the seller.
The pair could continue to go sideways for the next day or two as the Non-Farm Payroll report comes out on Friday. This announcement always causes a big uproar in the more risk-sensitive pairs such as this one. The market seems to be anticipating a better number this month, so the real risk of surprise would be to the downside. In the meantime, we are still thinking of this pair as being in a range between parity and 1.05 for simplicity’s sake.
Written by FX Empire