The AUD/USD pair tried to rally during the session on Wednesday, but the 0.88 level offered enough resistance to push the Australian dollar back down. This is where I expected to see resistance, so quite frankly this move wasn’t that surprising. The Australian dollar has been crippled lately, and the fact that the trend seems relentless, I’ve had no interest in buying it at all. As a matter fact, I have absolutely no interest in buying until we break above the 0.92 level, something that we are nowhere near going at the moment.
With that being said, the fact that we form something along the lines of a shooting star suggests to me that we are in fact going to continue going lower, and that should be a nice selling opportunity as I believe the next target is going to be the 0.85 handle.
Not all correlations are holding up.
Not all of the usual correlations are holding up, as the gold markets haven’t been able to give much of a lift to the Aussie dollar. After all, on a day where the gold markets rose, the Aussie sold off, which is somewhat unusual. The correlation doesn’t always have to hold up like that, but it does tend to pan out over the longer term as Australia exports so much gold to the rest of the world.
With that being said, I believe that the downtrend should continue, and the fact that there are concerns about Chinese growth now, at least in a mild sense, should send the Australian dollar lower anyway. The Australian dollar is one way to play the Chinese economy by proxy, as the Aussies export so much raw materials to the Chinese to fuel the construction boom that has been going on.
Even if we break higher, I believe that selling opportunities abound above, and as a result I would be selling any type of resistant candle. I am not looking to buy at all, and expect that short-term selling opportunities will be the way to take advantage of inherent Australian weakness.
