Last night, the Australian dollar rallied against its major trading partners after the RBA softened its tone in the policy statement. The Bank removed the phrase "further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices."
The 240-minute AUD/USD shows that last night's rally may have triggered a significant short covering rally. Price respected major support from the .7250 area and could be poised to see a bullish burst target the 50-day SMA, which currently trades around the .7558 level.
In the short-term, price may find tentative resistance first from a bearish ABCD pattern at the .7431 area. If valid, we could see a modest pullback before the bullish bounce resumes.
The trade: Buy AUD/USD .7350, with a stop loss at .7275 and take profit at .7500. The risk/reward ratio is around 1:2
Edward J. Moya
Chief Technical Strategist
WorldWideMarkets Online Trading