The AUD/USD pair fell during the session on Thursday, dropping to the 0.9350 level. That being the case, the market certainly looks like it could fall from here, but there is a significant amount of support down at the 0.93 level, meaning that possibly the market continues lower but only after a significant breakdown. On the other hand, if we get a supportive candle here, we could start buying as well as the market could head back towards the 0.95 handle. The market breaking above the 0.95 handle would in fact be very bullish, and would be more of a buy-and-hold type of situation. However, the last two sessions have been rather brutal against the Australian dollar, so it’s hard to imagine that there isn’t something going on here.
Breaking down from here would send this market down to the 0.92 handle, an area that is massively supportive. Because of that, we do think that there are a couple of possible trades coming up, and we are somewhat ambivalent about which direction the market goes, and will simply wait until we get some type of move in one direction or the other in order to be involved. We believe that either direction will work, but it’s very likely that we could stay between the 0.92 level on the bottom, and the 0.95 level on the top for the time being, and possibly even as long as the summer as the Forex markets could get fairly quiet.
Ultimately, we will have to pay attention to the gold markets as well, as the correlation is well-known between the two markets. On top of that, we have to pay attention to the idea of whether or not the Federal Reserve will be able to taper off of quantitative easing going forward, which of course should boost the value of the US dollar. On top of that, it really puts a beating on the value of the Australian dollar, as it is considered to be a “risky” asset. The markets are at a bit of an inflection point right now, so we will certainly be watching.
