The AUD/USD pair had a fairly negative session during the Thursday trading hours as the "risk off" attitude came back into play. Markets were necessarily sold off as brutally as they were on Wednesday, but we still see continued weakness in risk assets around the world.
One of the biggest reasons that the markets are so skittish right now is the fact that we have the whole "fiscal cliff" situation in the United States playing out. With that being the case, a lot of traders and investors will be concerned that the United States will throw itself back into another recession. With Europe in a recession, adding the United States to that club would of course be disastrous for global growth.
By the end of the session though, we did see a little bit of a bounce from the 1.03 level. Looking at this, it appears that it is a minor support area, and I believe that we will continue to fall through it. However, we could perhaps get a slight bounce being that it is Friday after all, and a lot of traders will not want to have positions on over the weekend.
Rocky Road Ahead
The reality is that the next six weeks should be very rocky in choppy trading in general. Risk appetite will come and go based upon the latest headline, and as we approach the holidays liquidity will start to dry up. Is because of this that I believe trade will have to be closed out quicker than usual, and that will be especially true with a commodity currency like the Australian dollar.
If both Europe and the United States find themselves in a deep recession, it is hard to believe that we will find global growth large enough to propel the Australian economy as well. Remember, the Australians export "stuff" to countries that they use in things like construction and may factoring. With its large mining sector, Australia benefits from economic growth from around the world. This is especially true when you're speaking of Asian economies. However, if both the USA and Europe slowdown, Asian economies will certainly get hit as they depend on those two markets for much of their exports.
With this being said, on a move below 1.03 I believe that we will hit 1.02 in relatively short order. As far as buying is concerned, I have no interest in it until we get above the 1.05 level as it would show a break through significant resistance.