The AUD/USD pair fell during the session on Tuesday, slamming into the 0.9650 level again. This area has been significant support several times in the past, and has been rather supportive recently as well. This is a significant support level on the longer-term charts such as the weekly, and as a result it's hard to believe that a lot of traders aren't paying attention in this general vicinity.
The Reserve Bank of Australia has recently suggested that perhaps the economy is slowing down, and with a weaker than anticipated economic numbers out of China - the Aussie dollar could find itself weakening further. There are a lot of pundits out there that invisibly moves down to the 0.90 handle, but in order to do so we would need to break the lows that we have said over the last couple of weeks. I firmly believe this can and more than likely will happen, and this is my base case at the moment.
The focus will be on Asia, as well as Washington DC
Of course, as usual the Australian dollar will be highly correlated to be going on in China and Asia on the whole. However, we are on considerable support so we could get a bounce from this area regardless. After all, the Monday session was very strong but more than likely predicated upon the idea of a weaker than anticipated PMI number out United States. This suggests to some traders that perhaps the Federal Reserve is not going to taper off of quantitative easing anytime soon, and therefore weekend the US dollar.
However, you have to keep an eye in the nonfarm payroll number. Quite frankly, I believe that the Federal Reserve is more concerned about employment than anything else at this point. It's the one part of the economy in the United States that simply have not picked up. Most of the employment "gains" tend to be of the variety that come when people "leave the workforce." In other words, the government simply stops counting them as unemployed because they have been unemployed for so long, hardly a sign of a robust jobs market. However, if we do get a stronger than anticipated employment number on Friday, this could really make this pair fall apart as the US dollar would undoubtedly strengthen. Going forward, it would take a move above the 0.99 handle in order for me to be comfortable going long of the Australian dollar, as it would show a significant shift in momentum. On the other hand, it would take a lot less convince me to sell if we broke the recent lows.
