The AUD/USD pair fell hard during the session initially on Thursday, but as you can see we bounced enough to form a nice-looking hammer. In fact, this hammer does not exist in a vacuum, as most of the “risk on” pairs during the session formed a nice-looking hammer. That generally means that the attitude is going to be good for the Friday session, and as a result we feel that this market should go higher on a break of the top of the hammer, at least high enough to continue the consolidation.
Although the longer-term has been very bearish of the Australian dollar, we have to admit that the Aussie has certainly put up quite a bit of a fight at this point. This candle of course suggests that the market is ready to go higher, at least for the short-term. The real question is going to be whether or not we can get above the 0.91 handle. If we get above there, we feel that this market is ready to start breaking out to the upside in it might even did not been somewhat of a longer-term play.
Gold markets have been a little bit more bullish recently, and this generally will help the Australian dollar. Also, one has to pay attention to the economic numbers coming out of Asia as the Australians are so highly leverage to supplying the Asians with the raw materials. Simply put, if Asia does well, so does Australia.
Any pullback at this point in time might be a little bit suspect actually. We have been calling for a daily close below the 0.89 level to signal serious selling, but with the recent action we have to question whether or not that’s actually going to happen. After all, you do have a fairly impulsive candle from a couple of weeks ago when we sliced back through the 1.88 handle to the upside, and most of the time those means something. The fact that we found support right at the time like candle suggests to us that there was real buying strength underneath that move, and we may very well be seeing the Australian dollar bottom.
