The AUD/USD pair fell rather significantly during the Friday session, and at one point even managed to break the parity level. This market has been an interesting one to watch over the last 18 months, as we simply could not break out of the consolidation area that the market had been forced into. On the downside, we have the 1.02 level which offered significant support, while the 1.06 level seem to be just a bit too resistive for the market to overcome. Now that we have broken down, you would think that it's a simple short sell.
However, you have to look at this market overall and understand that the parity level is an area that has caused quite a bit of reaction over and over. Also, below the parity level is the 0.98 handle which is the beginning of massive support. Quite frankly, I think it would take something very serious to break down below that level. Adding fuel to speculation that parity will offer quite a bit of sport is the fact that we did bounce back over the parity level by the end of the session. Don't get me wrong, I'm not suggesting that buying the Australian dollar at this point in time is the right thing to do, just that there will certainly be a fight.
Gold
One of the things pushing the value of the Australian dollar down without a doubt would be the gold markets in the way they have sold off. However, the gold markets have fought back as well, so it appears that the correlation between the Australian dollar in the gold market continued to affect the way both of these markets move. I believe that a break of the bottom of Friday's range would be reason enough to start selling, but expect 0.98 offer quite a bit of support. Because of this I believe it is a short-term trade, and that the easy money has already been made for the sellers. Alternately, I think that a bounce from this area will find a significant amount of resistance at the 1.02 handle, and signs of weakness there could be shorted.
