The bullish extension on Aussie dollar that I targeted on March 13th not only reached the .9200 handle, but extra momentum took it almost to .9300 as expectations grow that the Chinese will announce stimulus measures and that Governor Glenn Stephens appears content with the improvement in the weakening Australian dollar. For the most part, the central bank has touted a preference to see the exchange rate closer to .8500.
Big Technical Picture
The record run from the 2008 low of .5967 to the 2011 high of 1.1079 has the key 50.0% Fibonacci retracement level holding at .8523. The range that may remain intact for 2014 very well could be the .8500 to .9500 zone.
Ripe for a Pullback
The daily chart shows that the inverted head-and-shoulders pattern was valid and that AUD/USD may remain bid after a solid round of profit-taking that may be triggered by the bearish butterfly pattern highlighted in gray.
Price is likely to rise again to maintain a bullish bias that may target the .9500 level. If the current downside momentum breaks below .9100, a stronger correction may see a move towards .8900.
The trade: Buy AUD/USD at .9175 with a stop loss at .9125 and a take profit at .9300. The Risk/Reward Ratio is just under 1 : 2.5
Edward J. Moya
WorldWideMarkets Online Trading