The AUD/USD pair rallied during the course of the session on Tuesday, and even went as high as the 0.77 handle. With this, we found quite a bit of resistance in that general vicinity and the market been sold off. Because of that, we ended up forming a shooting star which of course is very negative and the fact that it formed at the bottom of the recent consolidation tells me that we could very well break down from here. If we do, the Australian dollar will more than likely head to the 0.75 level given enough time.
That’s not to say that we can’t rally, and it’s not to say that a rally would change my opinion. In fact, I believe that a rally only offers value in the US dollar, and I would be very interested in selling at higher levels if it happens. Because of the action that we have seen over the last several days, I am more bearish of the Australian dollar now than I was before.
Gold markets look suspicious
I believe that the gold markets look a little bit suspicious at this moment as well, and they certainly don’t look like they are ready to help the Australian dollar anyway. With that, I would continue to be bearish of both in general, but I do recognize that short-term volatility should continue to enter this market from time to time. It’s very likely that the 0.80 level will continue to be the absolute ceiling in this market, and as a result keep the trend to the downside.
I actually expect this pair to break down below the 0.75 handle, and once we do I would suspect that it would head to the 0.70 handle. That doesn’t mean that it will be an easy move, far from it. I believe that it’s only a matter of time before the breakdown comes but I also recognize that there will be a lot of bouncing around between here and there, so short-term trades to the downside will probably continue to be my favored way to play this pair.
