Image by jhyerczyk via Flickr
After piercing a lower level Gann angle the last two sessions while walking down a steeper one since topping at 1.0764, the AUD USD is rebounding today.
Not only did the market regain an uptrending Gann angle at 1.0226, but it is also trading above a downtrending Gann angle at 1.0244 and a Fibonacci level at 1.0246. These are all signs that shorts are beginning to cover and that bottom pickers may be entering the market.
Should the market close higher, a closing price reversal bottom will have formed. The key to sustaining this move will be a follow-through rally on Wednesday. Once the market clears the 50% price level at 1.0345 it has room to the upside with another downtrending Gann angle at 1.0505 today, the next likely target.
Although this pattern has the ability to produce a 2 to 3 day rally equal to at least 50% or more of the previous break, it does not change the trend to up, but may actually offer bearish traders a fresh opportunity to short again after reaching its minimum objective at 1.0456.
Fundamentally, today’s potential reversal bottom is being driven by speculation that the Reserve Bank of Australia will not cut its benchmark interest rate in the short-run. This action was prompted by the RBA’s September monetary policy minutes released on Tuesday.
