Price action on the AUD/USD daily chart emphasizes the key respect of the 50-day SMA. After last week’s fireworks of U.S. dollar strength from a stellar jobs report, price has been unable to break below .9328. If we do see another round of U.S. dollar strength, this however may not continue against the Australian dollar, even though I still anticipate weakness may target the yen and euro this summer. The next 24 hours may be key for this pair. If we do see another round of selling respect the .9300 barrier, which also could be the reversal point for a bullish ABCD pattern a return towards the .9500 area may be targeted.
In addition to the potential ABCD pattern, price may also respect the 23.6% Fibonacci retracement of the 2014 low to high move. While the RBA may continue to talk own its own currency, some speculate that a rate cut may be in the future, and many anticipate the market pricing in higher U.S. dollars across the board, I do not believe that the case with many of the commodity currencies. With every better piece of Chinese and Australian data (net exports are surging), we will not be surprised if we see an eventual return to .9750. If bullish price action is able to recapture the .9500 area, we could see a double-top pattern form along with the 2013 high.
If the Australian currency however breaks below the key .9260 level, further downside may target the key 50.0% Fibonacci retracement level of .9087.
The trade: Buy AUD/USD at .9305 with a stop loss at .9245 and a take profit at .9495. The Risk/Reward Ratio is around 1:4
Edward J. Moya
WorldWideMarkets Online Trading