ForexPros Daily Analysis May 05, 2011

The AUD/USD is correcting towards a daily swing buy

The daily AUD/USD has continues to correct lower, creating intraday downtrends on the 15, 30, and 60-minute time frames fueled by the weakness in commodities, namely the two-day sell off in crude oil.

The pullback in crude oil begun with the exhaustion at 114.83 which reflects the selling pressure in front of the 115.00 major psychological level. The subsequent trading sessions have seen a sell-off to below 109/bbl and has been a drag on the AUD/USD (and USD/CAD as well).

The uptrend on the daily AUD\/USD confirms the bullish Directional Bias which increases the likelihood that support levels will be bought and also means short entries are COUNTER TREND. Not that I am against a short on the five, 15, or 30-minute time frame if it's valid but I'd rather position my entries with the trend and the dominant market psychology.

That being said, the downtrend on the 15-minute chart is correcting into the resistance of the 34EMA Wave while the 30 and 60-minute charts both still have a "four to six o'clock" mark down trend. This means that the intraday time frames are not (yet) confirming that the bears are done.

There's still more room to the downside before the daily reaches the "swing short zone" between the 20 period SMA and 34 period EMA high.

Look for support to also be waiting at the 1.0680 level if 1.0700 is broken. This level is only 40 pips away so it is certainly not out of the question.

With the U.S. Dollar Index continuing to dance around the 73.00 level, the AUD/USD uptrend will likely be more dependent upon crude oil stabilizing between 108.50 and 108/bbl.


Forex Trading analysis written by Raghee Horner for Forexpros.


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