The Australian dollar initially trying to break down during the day on Wednesday, but we did get a bit of a bounce. However, that bounce was somewhat short-lived as fears arise over tensions from the Korean Peninsula. Quite frankly, this is just noise and a lot of drama, but at the end of the day it works against the value of riskier currency such as the Aussie. I believe that this has only exacerbated the downtrend that we have seen as of late, and if we can break down to a fresh, new low I think that the market then goes to the 0.7750 level underneath which was a massive resistance barrier. That resistance barrier was not tested for support, so it makes sense that we drop down to that level. I think that short-term rallies that show signs of exhaustion are nice selling opportunities.
Quite often, gold will drive where the Aussie goes. However, gold is being bought as the Aussie as being sold, as this is a safety play more than anything else. Because of that, don’t worry too much about the gold influence on the Australian dollar, least not for the next couple of sessions. Sellers will be attracted to this market as the US dollar seems to be picking up steam worldwide, and that the Australian dollar is going to be highly sensitive to what goes on in Asia anyway, and now that there is quite a bit of volatility around the Korean Peninsula, it makes sense that the Aussie would pay. Ultimately, this is a market that is simply trying to retest the previous resistance, and the fundamentals are starting the lineup to have traders send this currency pair back down to that region. I don’t have any interest in buying currently.
Written by FX Empire