The AUD/USD pair tried to rally during the session on Tuesday, but as you can see failed breaking above the 0.9650 level. As a result, we have formed a shooting star the very bottom of the recent trading range, and we sit at a very precarious position. I think if we can break down below the recent lows formed last week, we could in fact see this pair completely fall apart.
If this happens, we could be looking at a move down to the 0.90 level. With that being the case, I think that the Australian dollar will continue to suffer, not only for the weak economic numbers coming out of Australia, but probably even more so for the week numbers coming out of China. The Australians are about to learn a very serious lesson about" putting all your eggs in one basket", as the Chinese economy continues to slow down.
While the Chinese economy is far from collapsing, the truth is that it is slowing down. That of course will have a massive effect on Australia as the Aussies supply China with most of their raw materials. Going forward, I expect the Australian dollar be heavily tied to growth in Asia, which is wishy-washy at best at times.
Shooting star at the bottom
The shooting star at the bottom of the fall like this is essentially a continuation signal as far as I can tell. Because of this, I think there is a high likelihood we finally breakdown, and this area should be a sign to traders that the selloff continues. It does matter on the longer-term charts as well, which of course will have a massive effect on the value of the Australian dollar going forward.
I think that if we can get above the 0.99 handle, the Australian dollar has a real chance at rallying. In the meantime, anything below that that shows signs of weakness is simply a sell signal. All things being said, I will be short of this market soon I believe, as the bearishness continues.
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