The Australian dollar has fallen rather hard during the course of the trading session on Tuesday as the market has been suggesting for a while could happen. Now that we are well below the 0.73 level, it is very likely that we will continue to see sellers at the very first hint of a rally. The Australian dollar is suffering at the hands of a more or less “risk off” type of attitude around the world, not to mention the fact that Chinese economic numbers have not been that strong as of late. The Australian dollar of course is highly sensitive to the Chinese economy, as Australia since most of its hard exports to that part of the world. Because of this, we must watch the correlation.
It is worth noting that we broke down through the 0.73 level, an area that had been massive support over the last couple of weeks. Now that we have formed this extraordinarily bearish candle, it is very difficult to imagine a scenario where we suddenly turn around. I think we are starting to open up the possibility of a move down to the 0.70 level underneath, which is a large, round, psychologically significant figure. The market could look at the 0.7250 level as a little bit of a “fair value level”, as this pair does tend to move in 500 PIP increments, as the multitude of major pairs tend to.
Regardless, I think that you are looking for short-term rallies that show signs of exhaustion to start selling, and I do not have any interest whatsoever in trying to get long anytime soon. Quite frankly, we would need to see a major turn of events to make that happen, as it is clear that the fears of a global slowdown will continue to favor the US dollar. The US dollar is considered to be a major “safety currency”, so that will continue to play out. You should also pay close attention to the 10 year note, because if it continues to attract a lot of inflow, which could be a sign that we are falling as far as risk appetite is concerned, and that of course will continue to work against commodities, which by extension works against the Aussie. As far as buying is concerned, I do not really have a scenario in which I am looking for long’s at this point.
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