The AUD/USD pair tried to rally during the session on Monday, but gave back quite a bit of the gains by the end of the session. That being the case, we ended up forming a shooting star, and I believe that this market is ready to pull back again. After all, we have been falling significantly over the course of several months now, and we are really starting to put pressure on the downside with the Australian dollar suffering. If we can get to a fresh new low, this market could fall apart and start heading to the 0.85 level. I believe this could happen, but it will take a bit of muscle to get there.
Even if we break the top of the shooting star, I believe that there is a significant amount of resistance just above the 0.90 level that could cause the market this selloff drastically. This area is so noisy that I really struggle to believe that the Australian dollar can get above it, and would not be convinced until we got above the 0.92 handle. If we can get a daily close above that, then it’s a completely different story at that point in time.
Gold markets look very soft as well.
Gold markets look very soft at the moment right now, and that of course will typically work against the value of the Australian dollar. At the same time, we have to pay attention to the Federal Reserve, and the fact that they have just announced a tapering off of quantitative easing. In that particular setting, it makes sense of this pair continues to grind much lower, and this will be especially true if the jobs numbers continue to be decent out of America.
That being the case, I believe that rallies will be selling opportunities going forward, and as a result I am only selling this pair at the moment. If we break down below the recent lows, I am not only selling his pair, but I am doing so aggressively as it would be a serious breach of significant support. At that point time, I would expect to see the 0.85 handle it relatively quickly. Below there, we could go as low as 0.80 over the longer term as well.
