The Australian dollar rallied during the day on Friday, but found enough resistance above the 0.74 level to turn things around and form a shooting star. While this is a negative sign, and we are sitting the 61.8% Fibonacci retracement level, we look at the weekly chart, we had formed a hammer. When signals conflict like this on time frames, I typically will go with the longer-term timeframe, and that means that a break above the top of the shooting star is not only bullish from the daily standpoint, but also from a weekly standpoint. Alternately, if we break down to make a fresh, new low, that is a very negative sign. It is because of this that I am not willing to sell the Australian dollar until we make a fresh, new low because it makes much more of a statement.
You simply must pay attention to the gold markets as they are such a fundamental driver of the Australian dollar. They currently look as if they are trying to rally the gold markets, which have a significant amount of support underneath. The uptrend line and the gold markets has held, and if the market can rise I believe that the weekly hammer shows that we will rise here as well. Regardless, there will be volatile times ahead, so you have to be able to deal with that type of bouncing around. If we do breakdown though, that is an extraordinarily bearish sign and I think we have much more room to go under those circumstances, perhaps reaching down to the 0.7150 level. Either way, let the market make up its mind before you decide to place a trade. It will be much safer that way, and profitable as well.
Written by FX Empire