The AUD/USD pair fell significantly during the Thursday session, and even managed to close below the 1.03 level which I had as significant support. Granted, it only close 20 pips below that area but it does signify that the strength in the Australian dollar overall may be waning.
As we look at the last couple of weeks, we have dropped about 2 1/2 handles which is of course no small move. The uptrend line from the beginning of June was broken, and it appears that the Chinese economy is slowing down. In fact, it is probably more to do with China than Australia. As the Australian economy needs the Chinese markets for its raw material exports, this certainly has some type of knock on effect to the Australian GDP.
Because of the solidity of the red candle for Thursday, it looks like we will more than likely continue lower. If the Federal Reserve Chairman Ben Bernanke fails to mention any hints of possible stimulus during the speech he is to give later today, this could put even further pressure on the Australian dollar as it is often inflated by rising commodity prices.
Beginning of a much larger move?
To be honest, I think this is the beginning of a much larger move. On a break of the bottom of the Thursday session, I am more than comfortable shorting this market and aiming for the parity level. I think the parity level of course will be somewhat supportive, as one would expect with the significance of the number, but in the end should give way.
The Chinese numbers are getting worse and worse, and we do have some fairly significant ones coming out over the weekend. We could see a pretty significant drop on Monday morning in the Australian currency if the Chinese numbers come out weak. Lately, they have been and there is no reason to think this is going to change. Plus, you have to wonder if the Chinese are willing to print the numbers they have, how bad are they really? It is this thesis that keeps me thinking that the Australian dollar will continue much lower.