By: DailyForex.com
The AUD/USD pair rose during the session on Monday, and as a result we managed to get back over the 0.98 level. However, while many people look at this as a potential bottom in the Australian dollar, I suspect that we will more than likely see significant resistance at the parity level. This is why I have the red line at the 1.0000 level on the chart. That area I suspect will offer enough downward pressure that we could see a resistive candle at that point in time.
A resistive candle in the general vicinity to me seems like a logical place to start shorting. Granted, we did bounce from the very lows of the larger consolidation area, but I suspect with the massive move that we have seen down over the last couple of weeks, that there is a real momentum to the downside and there are a lot of people that would love to get short of this pair given half a chance. I believe that chance will form at the parity level, and I plan on being one of those people. (Full disclosure: I am not in this market in one direction or the other at the moment.)
Poor economic numbers out of Oz.
The economic numbers out of Australia have been weaker lately, and as a result it makes sense that the Australian dollar gets punished. Also, there is considerable fear that the Chinese economy is slowing down, and the Australians are without a doubt there biggest supplier of raw materials such as copper, iron, and gold. Because of this, the two economies are tied together quite often, in the Australian dollar is in some ways a proxy for the Chinese Yuan.
Going forward, it isn't until we clear the parity level on a daily close that I would feel comfortable buying this market. If that doesn't fact happen, I believe that we can go back up to the 1.06 level, so there is plenty of room to go higher and therefore I don't feel bad about buying all the way down here if that's the case. Otherwise, I will be more than happy to continue to short the Australian dollar with the rest the market.