The AUD/USD pair fell during the session on Thursday, continuing to consolidate right around the 0.93 handle. Just below at the 0.93 handle, I see a significant amount of support, extending all the way down to the 0.9250 level. With that in mind, I think that this market could very well bounce, but I do recognize that the 0.95 level above is fairly resistive, and should keep traders a bit cautious about going to long of the Australian dollar.
With that being said, the Aussie dollar has diverged from the gold markets recently, something that doesn't happen very often. Longer-term, the two tend to move in the same direction, so this has me a bit perplexed at the moment and as a result I am on the sidelines currently. However, I do recognize that a move below the 0.9250 level on a daily close would be a very negative sign, as it would not only break down through some support, but it could potentially show a little bit of a head and shoulders depending on how things go between here and there.
Federal Reserve and tapering, and the effect on gold.
Whether or not the Federal Reserve can taper off of quantitative easing is the question that everybody's asking in every market at this point. It has a particularly interesting effect on gold as the US dollar would decline if the data shows that the Federal Reserve cannot taper, and gold rises. Interestingly enough, that should eventually push up the value the Australian dollar, but it appears that people are more worried about global growth than the value of the US dollar at the moment.
However, much like the weather, the markets will change when it's focusing on the blink of an eye, and as a result we could suddenly find ourselves worried about the Dollar more than any type of economic expansion. If that happens, this market will go higher. However, I believe at this point in time we are somewhat going to grind sideways until we get some more answers out of both Asia and America.
