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AUD/USD: Possible Pause In The Downside

BySteven Goldstein
Published 06/25/2013, 07:24 AM
Updated 07/09/2023, 06:31 AM

Amongst my musings about trading and market psychology I occasionally comment on some aspect of the market or a particular market. One of my favourites markets, which I have commented on a couple of times over the past couple of years, has been AUD/USD. My most recent comment was from the 6th Feb and was titled ‘Is the AUDUSD in the early stages of turning?’.

I probably don’t need to elaborate on events of the past two months, unless of course you have been on holed-up in an Ashram half way up the Himalayas. Whilst my big picture view still favours further correction on the AUD/USD, probably to somewhere in the low 80s at some point later this year or perhaps next, in the meantime, I feel that the market has done an awful lot of damage in a short space of time and may be close to exhausting the immediate downside: The market psychology is now very bearish; there are probably very few people currently long, and significantly the market has hit two key ‘Fibonacci’ correction levels in the past 24 hours. – The chart below highlights these major levels; 38% of the entire rally from the 2008 low, and a 62% correction of the rally from the 2010 low.

Buying AUD/USD now to go long would be a move only for the very brave, of which I do not count myself. However shorts may wish to consider paring back on their position or taking profits around these levels, and those with a desire for a speculative longs may wish to see how the market fares around these levels over the next week or two. On the other hand, a clear and sustained break, on good volume, below these fibo levels, would suggest that I am wrong and that further downside lies ahead.
AUD/USD

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