AUDUSD FX SPOT - Possible pause in the downside as market hits key Fibo levels.

Amongst my musings about trading and market psychology I occasionally comment on some aspect of the market or a particular market. One of my favourites markets, which I have commented on a couple of times over the past couple of years, has been AUDUSD. My most recent comment was from the 6th Feb and was titled ‘Is the AUDUSD in the early stages of turning?’. 

I probably don’t need to elaborate on events of the past two months, unless of course you have been on holed-up in an Ashram half way up the Himalayas. – Whilst my big picture view still favours further correction on the AUDUSD, probably to somewhere in the low 80s at some point later this year or perhaps next, in the meantime, I feel that the market has done an awful lot of damage in a short space of time and may be close to exhausting the immediate downside: The market psychology is now very bearish; there are probably very few people currently long, and significantly the market has hit two key ‘Fibonacci’ correction levels in the past 24 hours. – The chart below highlights these major levels; 38% of the entire rally from the 2008 low, and a 62% correction of the rally from the 2010 low.

Buying AUDUSD now to go long would be a move only for the very brave, of which I do not count myself amongst. However shorts may wish to consider paring back on their position or taking profits around these levels, and those with a desire for a speculative longs may wish to see how the market fares around these levels over the next week or two. On the other hand, a clear and sustained break, on good volume, below these fibo levels, would suggest that I am wrong and that further downside lies ahead.