The AUD/USD pair managed to fall during the session on Tuesday, after initially surging higher. This shooting star shaped candle is a bit of a signal that perhaps a pullback should be coming.
Granted, the fact that we’re the top of an up trending channel suggest this as well, and because of this we think this is a pullback – not some type of massive meltdown waiting to happen.
Once we reach the bottom of the channel, we think that massive support should come into the markets. We also think that the 1.05 level just below could provide that support as well. Obviously, if we break the top of the shooting star for the Monday and Tuesday session this would be a bullish signal as well. The fact that we would be breaking out of the up trending channel also suggest that momentum would be picking up rapidly for buyers.
It should be noted that the candle from Friday still hasn’t even been dented, and it does suggest that perhaps there are plenty of buyers below. With this in mind, the markets believe that several central banks will start easing again, and is almost always does good things for the Australian dollar as it is a commodity currency. We expect the gold markets do well, the oil markets, and perhaps even most of the mineral markets going forward if this is true, and this is the one currency that traders think of when wanting to play the commodity trade. In a sense, there will be a bid built in this pair going forward as long as the banks look weak.
We think that overall this pair will continue higher, and this will be especially true if we see some type of easing out of the Federal Reserve, which of course is the major catalyst for these types of commodity rallies. The European Central Bank more than likely will use as well, so this really could put a floor and on the commodity trade. We are waiting for a pullback in this pair from which to buy. Selling is in a thought into we get well below the 1.03 level.
Written by FX Empire