AUD/USD has the potential to be one of the most interesting pairs in the near term. This is mainly because of its well known correlation to risk appetite around the world, and the obvious correlation with commodities on the whole as well. With the situation around the world looking more and more weak, the commodity markets will certainly feel the heat as global economic growth slows.
The Australian economy has some of its own issues, mainly a housing bubble waiting to erupt, but in the big scheme of things Australia’s biggest problem is the rest of us. The market will simply sell off anything risk related first, and ask questions later on bad headlines. With the Greek elections looming for Sunday, there is a high probability that the Aussie will be sold off in the mean time as risk will be shunned in case of an election result that puts the anti-austerity politicians in power. The polls in Greece presently have the two sides neck and neck, and there is almost no doubt that the traders out there that are “long risk” will want to close those trades before the weekend.
Parity holds
Of interest is the fact that the parity level seems to be a major force in this pair again. The level will always get some kind of reaction, but previously the pair sliced through it in general. The level also has the 50% Fibonacci level just above it adding to potential resistance, so the fact that the pair will fail in the neighborhood is hardly a surprise.
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The pair has been in a downtrend for a reason, and having said this – I cannot buy the Aussie at the moment, although I find nothing wrong with the Aussie itself. (Everyone either has a bit of a housing bubble, or has recent popped one.) The biggest concern comes with the automated trading that goes on with massive volatility, and the Aussie is one of the first currencies the markets will dump in rough times, which is something we certainly are experiencing. I am looking to sell this pair on a break of the lows from the Wednesday session, and possibly fading a shorter term resistive candle near parity if we get back to that level.