By: DailyForex.com
The AUD/USD pair fell originally during the session on Thursday, but as you can see we bounced enough to form a hammer that is based on the 0.9650 level. This area of course is important because it is supportive on the longer-term weekly chart, and as a result I think that we could possibly see a significant bounce from this point. On top of that, there is almost nobody out there that things the Australian dollar has any value at this point. That's normally about the time we start to see people lose money.
Nonetheless, I'm not willing to buy this market, because I think the 0.99 level will be far too resistive to overcome. I'm simply looking at this as a signal to stay out of the market and wait for a resistive candle to start selling. On a resistive candle, or the possible break down to the downside I am willing to start selling hand over fist. I believe that if we can break down below the recent lows, which is essentially the 0.95 handle, we could see a move down to 0.90 or so.
Longer-term problems for the Australian dollar
I believe that there are longer-term problems for the Australian dollar, as the Australian economy is so highly tied to the Chinese economy. The Chinese economy of course is suffering from a bit of a slowdown, and there of course is a significant amount of distrust of the economic numbers that are coming out of Beijing these days. Because of this, I think that the Australian dollar will suffer a little bit of a confidence crisis as well. I don't certainly think that this is a meltdown waiting to happen, but rather a repricing of the value of the Aussie.
Above the 0.99 handle however, I think the momentum will have changed enough to start thinking about going long, and possibly even aiming for the 1.086 level. I don't know that they could happen, but if we are above that level, you simply cannot fight that type of snapback, no matter if you "think" it "should" happen.