The Aussie staged a fairly impressive comeback on Friday after the disappointing Non-Farm Payroll number out of America. It originally sold off, buy by the end of the session we saw many traders openly betting on further quantitative easing out of the Federal Reserve as the economic situation in the States seems to be slowing down.
However, this is far from a complete conclusion, and a lot of things can come up between now and then. The Chairman of the Fed gives testimony to Congress on Thursday, and it is at that session we may find out what he is thinking. However, if there is no mention of easing – this pair will more than likely get slammed as most of this rally will have certainly been based upon that possibility.
The Aussie is tied to commodities, and the idea that the Fed is about to ease should in theory at least, give a boost to commodity prices. However, this is all speculation at this point, and like I said before – there is serious potential for a lot of disappointment.
0.98 resistance
The 0.98 level hasn’t been broken yet, and I see it as potential resistance at this point. I think that the area should bring in sellers if we get some kind of slowing of the surge higher. There certainly comes a point where the adults step in to the market and start to think about the true likelihood of Fed easing. True, they certainly could do so – but there is only so much they can do at this point in time. The politics of further easing by the Fed isn’t a popular road in the States, and this certainly can come into play as it is an election year. Yes, I know the Fed is “independent”, but Mr. Bernanke has shown proclivities towards erring on the side of caution when it comes to the President’s policies.
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It is with the high possibility of disappointment that I am looking to sell. The “risk barometers” that I use are all showing fear out there still, and as such I think we are simply setting up for a further fall. Weak candles on the daily chart near 0.98 and parity are sell signals to me, as well as a fresh low.