The AUDUSD pair went back and forth during the course of the day on Monday, showing the 0.90 level to be supportive though, which of course is very important as far as we can see. The fact that we covered the range of the gap during the session suggests to us that if we can managed to break the top of the range for the day on Monday, the market would then start heading towards the 0.92 level, something that doesn’t surprise us if it happened simply because we are far too oversold.

We also recognize that the 0.92 level would be massively resistive as well, and as a result we would not hesitate to sell a resistant candle in that area on a bounce either. This could be a very interesting market to trade over the next several weeks, as we continue to bang around in the larger regions as far as support and resistance is concerned.

A break above the 0.92 level would of course be bullish, putting the market back into the previous consolidation area all the way up to the 0.95 handle. This of course would be bullish but offer short-term trading opportunities in both directions. Between now and then though, we think that the 0.90 level all the way up to the 0.92 level is more than likely going to be the consolidation area that we work within.

With that being the case, we think that choppy trading conditions will continue, but ultimately we feel that the Australian dollar is far too oversold at this point. If we did break down below the 0.90 level, this market would more than likely come completely undone but really at this point in time we tell that’s going to happen. If it does, we anticipate a move back down to the 0.88 level, an area that has significant support there as well. Ultimately though, we are much more comfortable buying at this point in time considering how oversold this marketplace is over the last couple of weeks, and as a result we are simply waiting for that signal.

Editor’s Note: Equity investors/traders can use the Currency Shares Australian Dollar Trust (FXA, quote) ETF to take positions in the Aussie dollar without a FOREX account.  The ETF looks to track the price of the Aussie dollar (AUDUSD), minus ETF fee. The fund seeks to reflect the price of the Aussie dollar (AUDUSD) with the shares representing a cost-effective investment relative to investing in the FOREX market.

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