The AUD/USD pair initially rallied during the session on Wednesday, but as we have seen several times before, the 1.05 came in as significant resistance. As far as the recent action is concerned, this has form what looks like it could be a double top. However, there is a ton of support at the 1.04 level, so this represents more consolidation than anything else as far as I'm concerned.
Looking at this chart, I fully expect to see this pair pullback to the 1.04 level where will find massive support. It really is until we break down below the 1.03 level that we start to see weakness again. With that being the case, this is the short-term trader’s type of market right now, and it will be difficult to trade for anything more than about 50 pips of the time.
We have seen the gold market selloff drastically, and although the gold markets are approaching a significant support level, it hasn't given the Aussie the kind of buoyancy that we have seen in the past. There are a lot of pundits out there suggesting that the commodity super cycle is starting to come undone, and if that's the case is will certainly hurt the Australian economy. However, I believe that if that's the case, we will see this pair go well below parity. This is not my base case right now however.
Continuing the consolidation
Over the last 18 months or so, we have simply bounced around between 1.02 and the 1.06 level. The nonfarm payroll number is on Friday, and I suspect that this pair will more than likely bounce around in this 100 PIP level between 1.04 and 1.05 in the meantime. Granted, there are three central banks meeting during the session today, but without a doubt by far the most important one that will affect the Aussie dollar, besides the Reserve Bank of Australia, is the Federal Reserve. As they are not one of the banks meeting, I expect that the reaction will be somewhat muted in this market. Going forward though, I fully expect to see this pair continue higher, but without gold it will be difficult for the Aussie to break the 1.06 level in order to get out of the larger consolidation area.
