The AUD/USD pair fell again on Wednesday to pierce the 1.04 level again. While the candle for the session is bearish, it appears that the level is giving a good fight, and the market looks as if it wants to bounce again.
The 1.04 level in this market is a massive area to watch for signs of buying or selling signals. The 200 day EMA is just at the level, and this will catch the attention of the longer-term trend traders as well, giving this market a bit of a bid going forward. The pair is always risk sensitive, so of course the other markets will have to be monitored for signs of risk appetite as well.
The 1.04 level is also the 38.2% Fibonacci retracement level from the massive move up, and it makes sense that traders are attracted to it. Also, it is the site of a massive breakout to the upside of a large ascending triangle. The triangle measured a move all the way up to the 1.12 level, and was the start of the most recent bullish trading that we have recently pulled back from.
The Chinese economy will also have its influence on this pair, and as long as it can stay relatively firm, there will be demand for Australia’s commodities, which of course creates demand for Australia’s Dollar. The pair is without a doubt one of the favorite ways for traders to “take on risk” in the currency markets.
The upside is still going to be the most likely risk going forward, as the longer-term trend is most certainly higher, but the recent move has been fairly steady in its bearishness. We believe that perhaps the weekly charts may be the best for making a final decision, but in the daily chart we have a specific area – the 1.04 zone – in which to make our trade. We aren’t interested in selling until we break below the 50% Fibonacci level below, and are willing to buy bullish candles in this area as the Aussie is so strong overall.
Written by FX Empire