The AUD/USD pair attempted to rally during the session on Monday, but as you can see failed miserably. By the end of the session we had a shooting star form on top of the 0.95 handle, an area that has been both support and resistance previously. This area is a large round psychologically significant number obviously, and as a result I firmly believe that we will have a bit of volatility in this general vicinity.
The one big concern I would have with shorting this market is simply the fact that a hammer had appeared just underneath current levels last week. Nonetheless, the trend is most decidedly to the downside, and I believe because of this it is worth risking a sell position if we can close on the daily chart below the 0.95 handle. Alternately, many analysts out there believe that this market is going down to the 0.90 handle, which is something that I have to admit as being a thought myself.
Watch the commodity markets
Watch the commodity markets for hints as to where the Australian dollar will continue to move. Although the correlation with gold as well known, we should also pay attention to copper markets if you have the ability. Also it is a large exporter of copper, as well as other base metals such as iron, and as a result the Australian dollar typically moves in correlation with hard assets. This shows itself most clearly in the futures markets, so therefore of gold, copper, and aluminum are all moving higher, then it's likely that the Australian dollar is as well.
Because of this, many traders out there like to use it as a proxy for the futures market, and if you look at the longer-term historical chart you can see why. I believe that as long as the markets are volatile, the Australian dollar will probably play second fiddle to the gold market for example. Traders will look for some type of confirmation, and since the Forex markets haven't necessarily been very good on that and, I would expect to see the Aussie dollar continue to follow the overall trend in commodities.
