The AUD/USD pair fell during the session on Monday in order to continue the weak action that we started to see last week. This pair is a great barometer of all things Asian economically, and this market suddenly is saying things aren’t as chipper as they once were.
The Chinese came out with an 800 billion Dollar stimulus package during the early part of the Monday session, and this caused the exact opposite reaction that you would have expected: The commodity currencies all got hit. I suspect this is because of the fact that the market is now wondering whether or not the Chinese economy isn’t worse off than the officials in that country were letting on. If so, this could be a disastrous turn of events as far as global growth goes.
The fact that this is happening towards the end of the summer also concerns me. Typically, we will see some type of move during the summer that is based more upon the low liquidity than anything else. Often, the move that happens in early September is the real one. If this is the case, it almost looks like the markets are screaming from lower risk appetite in general.
Channel broken
In there has been in up channel in this pair since the beginning of June. We manage to pierce the bottom of this channel on Friday, but close back just above the line. On Monday, we simply broke through it and stayed down there. The market is closing at the very lows of the session, and it does in fact look like the 1.03 level is almost a given at this point.
The 1.03 level is the Gateway to parity. If we manage to break down below it, there are a few areas of support below, but the truth is that we will more than likely see parity and relatively short order. As for buying this pair I have absolutely no plans. Now that this channel has given way, and that the larger money is about to come flooding back into the market, I am not willing to take the risk associated with buying the Australian dollar right now. If the Chinese adding stimulus to their economy isn't enough to push the Aussie dollar higher, I don't know what is.