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The AUD/USD pair rose again during the Thursday session, but gave back over half of its gains in order to form a shooting star. While this normally would have us thinking of a short position in the marketplace, there has to be an acknowledgment of massive support just below at the 1.05 level as we had several resistive shooting stars recently.
Another thing that is influencing are trading decisions not to short this market is simply the fact that we are in an up trending channel. We recently had the top of it, and it does look like a pullback could be coming. Having said that, and the combined importance of the 1.05 level we feel that shorting this market would be relatively you're responsible this point in time. Rather, we suspect that this is going to be a pullback that should offer value as the Australian dollar will be essentially "on sale."
In fact, selling the Australian dollar is the least attractive currency position that we could place in the Forex markets at this time. This is essentially based on the idea that the central banks around the world are entering a new round of quantitative easing, and the Federal Reserve is expected to do so in September. When this happens, the commodity currencies such as the Australian dollar do tend to get a bid, and as such we think that this market will go much higher over time.
Adding to the strength of the Australian dollar and the story for not shorting this pair, the Australians released an employment number earlier in the day that was much stronger than expected. This means that the manufacturing in Australia does continue to expand, which of course applies raw materials to Asia - a key indication upon cross-border trade.
In this current marketplace, we see selling as only viable under the 1.03 level. In the meantime, we are willing to buy pullbacks that show support closer to the bottom of the uptrend channel, and of course a break of the highest which would signify a momentum shift upwards as the top of the trend channel would be giving way at that point.