The AUD/USD pair fell yet again during the Wednesday session as the downtrend continues. However, it should be noted that the end of the day saw a bounce and we manage to form a hammer for the daily candle. This suggests that perhaps the 1.02 area should cause little bit of a bounce.
However, we still are very bearish of this pair as the Chinese economy seems to be winding down a bit. With this being said, we think the 1.03 level will be overly resistive and probably too much for this market to overcome. If it shows a bit of a rally going higher and a failure in that general vicinity we will short the Australian dollar aggressively as we still think it heads down towards the parity level before it’s all said and done.
Alternately, we think that a break of the bottom of the Wednesday candle is also a massive sell signal and should be shorted heavily. The real battle is going to be at the parity level, as it is a large psychological number that will attract a lot of buyers and sellers. There will be a lot of questions asked them the Australian dollar at that point time, and we think that the next major move will be decided at that price.
If we can get a daily close well below the parity level, we think that the Australian dollar will eventually hit the 0.95 handle, as this would jive well with the overall global economy, as it appears to be slowing down. The Chinese of course are the number one customer of the Australians when it comes to their raw materials, and as such it would reflect the reality that the Chinese will be buying less.
Also, the two speed Australian economy may force the Reserve Bank of Australia to cut rates as the Australian economy is far too skewed towards the mining sector, and much of the other ends of the economy are suffering at this point. Because of this, we are still bearish of the Australian dollar and do look to sell it overall.
Written by FX Empire