The AUD/USD pair has been enjoying a massive rally over the last several months, built mainly on the differential in interest rates between the two currencies. The pair will often rise with the world's stock markets, and is especially correlated with the S&P 500 index. The pair has recent pulled back though, and will have shaken some bulls out of the market.
The bounce that we have seen has been from the 1.04 level, and this area was also the 38.2% Fibonacci level from the rise as well. This suggests that the bulls are starting to get more support from traders that have missed out on the previous rally. The 1.04 level was also the site of a breakout from an ascending triangle at the start of the year, and the height measured a move up to the 1.12 handle. With the chart looking as it does, there is nothing telling us that this won't happen.
The pair managed to have a fairly neutral day on Monday, and the result was a hammer like shape for the candle. The 1.06 level that it currently resides in is the bottom of a previous consolidation area, and as a result should now be resistance. However, the hammer candle suggests that we are building up the pressure for a bull move. In this context, we see that a break higher should see the pair continue to rise until we hit the top of that previous consolidation at 1.08 or so.
The commodity trade will also help this pair, as the world's central banks continue to pump liquidity into the markets. The 1.10 level above the consolidation zone will also be somewhat resistive, but should be reachable in the near-term. The breaking of the 1.10 level has us running to the 1.12 level mentioned earlier. The selling of the Aussie isn't in our thoughts at all currently as the bullish move over the last three months has been very strong. This pullback will more than likely just prove to be a buying opportunity in this pair yet again.
AUD/USD Forecast March 20, 2012, Technical Analysis
AUD/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3