The Australian dollar had an interesting session, initially falling, perhaps in sympathy to the moves in the New Zealand dollar. However, we rallied a bit but now are starting to see resistance again near the 0.7380 handle. This was an area that offered support in the past, and I think that the Australian dollar really doesn’t know what to do with the moment, mainly because Gold markets rallied, but at the same time the US dollar isn’t exactly falling apart. If gold turns around and starts falling again, I think the Australian dollar will continue to drop. Commodity currencies in general are very unattractive to me right now, mainly because the other ones are losing quite a bit of strength as well. The Canadian dollar and of course the New Zealand dollar both look very soft, the Norwegian krona doesn’t do much better either. This doesn’t even take into account the Mexican peso which now looks as if it is starting to soften yet again.
Short-term rallies and exhaustion
I’m looking for short-term rallies and exhaustion to start selling, at least until we can break above the 0.7425 level. If we can get above there, then fine I will change my mind. Been in the meantime, I think that even though we continue to see volatility, it is only going to offer value in the greenback that we can take advantage of. If we can break down below the lows again, I think that the market will then go fishing towards the 0.72 handle, and then eventually the 0.70 level under that. Pay attention to gold, I think that’s the easiest correlation that you can draw to this market, especially considering that it did show some signs of strength initially during the Thursday trading session.
Written by FX Empire