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AUD/USD Failed Test of Support May Create Scalping Opportunity

AUD/USD Failed Test of Support May Create Scalping Opportunity

2010-05-25 15:07:00
John Rivera, Currency Analyst
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The prevailing concerns over the European debt crisis continue to be a weighing factor on the Australian dollar. Escalating political tension in Korea added to the flight o safety which is typically detrimental for the high yielding Aussies as the carry trade unwinds. However, we have seen a solid support level hold following a second test which may establish a short-term floor for the pair and considering the current environment upside potential may also be limited. Therefore, we could see the pair trade sideways and settle into a range making it an ideal scalping target.

 SR-10-05-25-01

Key Technical Levels

 SR-10-05-25-02

The 38.2% Fibo of 0.6008-0.9408 is providing support at 0.8110 which has considerable validity since it is a retracement of a major rally. The formidable barrier may limit downside risks and provide a target level for entering and exiting positions. We have started to see the pair trend sideways and a range has developed between 0.8075-0.80350. The pair may still be too volatile for a traditional scalping opportunity at this point but if we see broader markets quiet then further consolidation could be expected.

Quantitative Metrics

 SR-10-05-25-03

The AUDUSD”S Bollinger band width has grown to 1482 pips as the pair has been in a steep decline. An ATR of 176 adds to the concern for scalpers as the daily volatility has continued to trend higher putting near the top of the most traded pairs. Meanwhile, fundamental concerns have pushed one week implied volatility readings higher across the board increasing the risks for high frequency traders.

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