AUD/USD Forecast December 13, 2011, Technical Analysis

AUD/USD got absolutely hammered on Monday as traders sold off most commodities. With the backdrop of a weakening EU and Chinese growth seemingly slowing down – the commodities markets got hit hard during the session. The Aussies supply the Chinese with much of their commodities that are used in construction and the like, and as a result it is often the Chinese economy that moves the Aussie more so than the Australian one.

The deleveraging of hedge funds and large traders could continue to push this pair lower over time as the worries seem to only compound over time. The rising bond rates all over the EU continue to punish anything risk related as well, and we should see that most rallies in this pair will fall going forward.

The parity level is just below, and should be massively supportive. The area has been violated several times, but a bounce isn’t exactly out of the question at this point. The level being broken to the downside could be a catalyst to fill the gap from a couple of weekends ago and push price down to about 0.97 or so. The upside seems to be capped by the 1.04 level as the most recent top saw a serious struggle to break it, and consequent failure. The level now will be the start of the resistance band all the way back to the 1.05 handle.

Because of these factors, we are willing to sell all rallies on weakness and will not buy the pair at this time. There are simply far too many problems around the world to consider going too far out on the risk spectrum and with this in mind, the pair will continue to struggle going forward. The events in Europe and China simply aren’t positive enough right now to consider such risky trading. The US Treasury notes should continue to attract bidders, and because of this the US Dollar continues to be in demand going forward. Until there is a clear and concise solution for the EU issues, we are sellers of rallies in this pair.

AUD/USD Forecast December 13, 2011, Technical Analysis

Written by FX Empire