$AUDUSD: Bears play chicken

• Posted by Raghee Horner
• on March 25th, 2011

So this time may be different.

The $AUDUSD has rallied past the level I was watching for an overbought scenario: the 1.0180 to 1.0200 area. This level was a natural for bears who wanted to hold the aussie down but they never showed as the daily chart wandered sideways and congested. This time is different perhaps. Think about the scenario surround the previous exhaustion. There were a lot of questions surrounding the Queensland floods, rate hikes, and the effect the floods would have on housing. Then came the lackluster home loans and all the worries became more than the bulls could support and the pair plunged only to rally once again

…and keep on rallying.

So here’s where the pair’s movement can get tricky.

The 1.0200 level has been smashed on the way to a test of the 1.0300 level. Today’s (Friday) resistance is at 1.0295 which reflects selling pressure at the “00″ major psychological level. The upward momentum has taken the 34EMA Wave (and therefore the market trend) and begun to transition it into what could be a very,very early look an an uptrend. (And I stress early!!)

It’s the surrounding fundamentals that have changed the most.

If it was the uncertainty surrounding the economic impact of the Queensland floods, effecting primarily housing, the Australian Dollar has shrugged that off. Realize the the gains today in the $AUDUSD comes on a session where the U.S. Dollar ($DX_F $USDX) is rallying strongly up from 75.84 to 76.56.

The 1.0257 high from December 31, 2010 has been broken and this is now going to be near-term support. If 1.0250 level can attract buying support, the 34EMA Wave will likely continue the transition into an uptrend. The concerns over Japan’s nuclear crisis are baked-into-the-cake and not a primary market driver any longer. The the Australian equities market surging once more have traders’ risk appetite whetted.

Additionally with the crude oil market firmly over 105.00 and the Continuous Commodities Index pushing higher to end the week, the AAUDUSD comm-doll has plenty of reason to perhaps be getting past the congestion of recent months and reaching for higher highs.

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