By: DailyForex.com
The AUD/USD pair rallied during most of the session on Wednesday, but found quite a bit of resistance at the 1.04 level. This area is the center of the recent consolidation area, and as such will serve as a minor's for and resistance level.
If you look at the chart from a longer-term perspective, we see that the 1.06 level is the top of the massive consolidation area, and the 1.02 level is the bottom. Quite often, you will see an area right in the middle where there is a "balance" between the two competing forces. This is why it will often make the currency pair react time and time again.
Looking at this chart, you can see the importance of 1.04 and how price will react to it. Quite often, you will see a currency pair fail to break through the "middle line" in order to reach the other side of the consolidation right before breaking out of the larger consolidation area.
While I cannot say that we are bound to break down out of this consolidation area, the fact that we are struggling with this level will certainly catch my attention if we start falling again. With the Friday jobs number coming of the United States, it is very likely that we could see a lot of volatility at the end of this week.
1.04 Area
This area looks vital to me, and as such I am paying quite a bit of attention to this currency pair at the moment. I believe that if we close well above the 1.04 level, a run back up to the 1.06 is very probable. Alternately, if we fail and start to fall from this general vicinity, I believe that not only an attempt at reaching 1.02 will happen, but a breakdown will happen.
It is because of this that I will buy this currency pair if we get above the 1.0450 level, and sell it if we get below the 1.0325 level. In the meantime, I think a lot of bouncing around will be the order of the day.