AUD/USD Daily Outlook- May 28, 2013

The AUD/USD pair did almost nothing during the session on Monday, as the Memorial holiday would've had the liquidity down in the United States. Also, the British were celebrating something known as "Spring Bank Holiday", and as a result liquidity would have been fairly low most of the day in general. Looking at this chart, it's obvious that the 0.9650 level is offering significant support, and because of this I think that it be very difficult to break down from this point.

This area that we are currently trading in is significant support. In fact, this area is significant support for the longer-term, and as a result I think this is a very important area the pay attention to in this market. I also think that we could see the beginning of a new intermediate trend, be it up or down.

Because of this, I am waiting to see if we can break down below the recent low in order to continue much lower, and I of course would be aggressively short. However, if we managed to break above the 0.99 level, I think that the Australian dollar will continue higher, possibly even as high as 1.06 level. In other words, this is one of those defining point in telling that you need to pay attention to the market because it is trying to tell you where the next several weeks, if not months are going to lead the market.

Reserve Bank of Australia

The Reserve Bank of Australia has recently suggested that perhaps it has further room to ease in the future, and the economic numbers certainly back up that suggestion. The Australian economy is highly leveraged to what's going on in China, which of course has been slowing down recently. Because of this, it is possible that the Australian dollar is going to significantly fall. If we collapse from this point in time, I believe that this opens the gateway to the 0.90 handle in the long run.

However, if the Aussie can hold its own, we could see a nice popped back to the 1.06 handle as it has been a magnet for price over the last couple of years. Sometimes the market pays us to wait, and I believe this is one of those times.