AUD/USD Forecast July 2, 2012, Technical Analysis

The AUD/USD pair absolutely exploded during the Friday session as the word got out that the European Union came up with a possible workaround for the Spanish and Italian bond markets. The ability to “kick the can” is a pretty amazing thing, and it appears that the EU is perfecting it.

The announcement was fairly light on details, so having said that we could see a reversal if the details turn out to be something the market doesn’t like. However, with the ferocity of this move, one would have to think that it should stick for the short term. The candle for the Friday session did manage to break above the 1.02 level, and this should be a bullish sign to most traders, including the ones in Asian that haven’t had a chance to react yet.

The Monday open will be crucial at this point. If we get a gap up, this market should continue to the 1.04 level or so before it is all said and done. Also, light liquidity in the market around the July 4 holiday in America should cause a potential spike here or there as the “risk on” crowd will look to take advantage of the new found excitement.

The real question is whether or not the moves are short covering rallies, and if this is the case, the Aussie will be one of the clearest places to see this. If we manage to reverse the gains from the Friday session, this will be the big tell on this. The parity level below the move would have to be broken to the downside for us to get aggressive about selling the Aussie.

On a gap higher – we are buyers. If the market fades the rally a bit, we could sell but won’t get overly aggressive about it until we see a sub-parity daily close. Between here and there, we aren’t doing much as we seen a lot of noise in the area at the moment. The gold markets are also in a choppy form of consolidation as well, and this holds true with the correlation between the two markets.

AUD/USD Forecast July 2, 2012, Technical Analysis

Written by FX Empire