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The AUD/USD pair fell initially during the Wednesday session, but bounced higher in order to form a hammer for the second day in a row. This is a very strong signal, and the fact that informed just under the 1.05 level suggests that there is significant resistance above but that it could only accelerate price as we get through it.
We are still bullish of the commodity markets in general as the Federal Reserve continues to pump out money. The Australian dollar should benefit as a result, but we see a lot of noisiness above. This might be a difficult trade to take, and if you are a bit more conservative, you could wait until the 1.06 level is broken through. If that level gives way, we think this pair could go much higher and will certainly target 1.08 at the very least.
However, it should be noted that the two hammers in a row also represent a potential sell signal. If the lows of both of those hammers succumb to the sellers, we could see a real rush to the exits. If that's the case, 1.03 would almost have to be a given. Once 1.03 is overtaken, 1.02 and parity are the next two levels the market will try to find.