The AUD/USD pair fell hard during the session on Monday, after initially trying to rally. However, the range wasn’t as impressive as one would expect, and it now looks like the pair is probably going to grind lower, trying to find support near the 0.95 handle. This makes sense though, as the pair has had such a strong move recently, and we have not come back to the 0.95 level in order to test the former resistance as support, something you see over and over in technical analysis.
The gold markets also are looking somewhat supportive, so between the two markets, it looks like we will see the US dollar weaken over time, and with the nonfarm payroll numbers coming out this week, we could have a catalyst for continued weakness. After all, if the Federal Reserve cannot taper off of quantitative easing, we feel that this market will go hard against the US dollar.
Besides, you have to keep in mind that even though there are some concerns of global growth, eventually the weak US dollar drives traders from the major New York firms into other economies and commodities. Australia is the best of all worlds, simply because there are so many minerals and commodities coming out of that country in order to supply Asian growth, something that has been consistent for years. Obviously, Chinese numbers will help and any strong economic numbers out of the Chinese mainland will also propel the Australian dollar higher, so keep an eye on that.
That being said, the 0.95 level does look rather supportive, and therefore we feel that it’s very likely that this pair grind lower at a slow pace until the nonfarm payroll number comes out and gives the markets a catalyst in order to move one direction or the other. Truthfully, it’s difficult to imagine selling this pair until we break well below the 0.93 handle, something that does not look very likely, at least not anytime soon as there is so much noise between here and there. The first signs of support though, we are more than willing to start buying.
Written by FX Empire