The AUD/USD pair rose during the session on Wednesday, after forming two significant hammers on the daily chart. However, you can see that the sellers stepped in and push the market back down below the 0.93 handle, and because of that I think this market may struggle to reach the 0.95 handle, an area that I was very interested in shorting at.
Having said that, if we can break down below the bottom of the hammer that was formed on Monday, I think this market could really start to fall apart. This of course will be tied to the commodity markets, especially gold which got absolutely pummeled during the session on Wednesday, losing well over $40 an ounce. Because of this, I suspect that the Australian dollar is without a doubt very likely to find the next several sessions to be difficult.
Asia looking weaker, commodity markets looking weaker, both are very bad for Australia
Asian economic numbers continue to be uninspiring, with even China slowing down. That being the case, Australia is getting less orders from its largest customers for raw minerals and other such natural resources. That being the case, this will certainly have an effect on the Australian economy and we are already starting to see the Reserve Bank of Australia talk about that exact problem. With that being the case, there is the possibility that more monetary stimulus could be coming down the road, and people are starting to speculate that the RBA will have to do a rate cut.
On top of that, you have commodity markets are getting absolutely decimated as the US dollar reigns supreme. With all that being the case, and the fact that you are pairing the Aussie dollar against the US dollar, this market should continue to go much lower, and I expect to see the 0.90 level hit over the next several weeks. I continue to sell rallies, and even if we do get higher than the highs from the Wednesday session, I still think that the 0.95 level will offer enough resistance to start shorting in that general vicinity as well.
