AUD/USD consolidates after trend line break

ForexNewsNow | Published on October 27, 2010 at 10:05 am

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Australian flagNEW YORK (Forex News Now) – The Aussie is currently stuck in a minor consolidation range after breaking what was a steep trend line on the daily chart. FX traders will be wary of the overhead “parity” resistance level, as the pair broke through for the briefest of moments on the 15th of this month.

The fundamentals do look good for the long-term, as gold markets are in a secular bull market.

Also, as a country that produces raw materials for the rest of the world, Australia is in an enviable position to the rest of the world, and FX traders will certainly be aware of this.

As the pair has broken through the parabolic daily trend line, this signals that consolidation is probably going to be the result for the immediate future. When pairs go straight up like this, there has to be some kind of “rest”, as you need renewed interest to make it rise again. There has to be a catalyst.

Because of this, moves like this normally signal a pullback is in the cards. As FX traders will like to take profits, hedge their exposures, and possibly reflect on where we go from here.

The longer the pair remains in consolidation, the more bullish that it looks, as it gives plenty of trader that are waiting for a pullback some urgency to get involved. They begin to think that there isn’t one coming, and that is entirely possible.

Of course, the huge psychological number of “1” right above this area is going to weigh heavily on this pair, and will be the kind of resistance that the .80 level once was, being tested over and over, and eventually giving way. It was once thought, “Is the Aussie really worth 80 cents?” The question now becomes whether or not we will say the same thing about parity. We may not right away, but a pullback would certainly get a lot of traders interested in finding out.

Audusd analysis

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