AUD/USD had a slightly bullish day on Monday after initially falling. The currency pair formed a hammer, and this of course is a very bullish signal. It appears that the 1.02 level is offering support at this moment in time, but we should keep in mind that the 1.03 level looks resistive.
With this in mind, and all of the noise coming out of various places like China and Europe, we are avoiding the Australian dollar even though we feel that it is being affected by things that have nothing to do with Australia itself.
As the Australian supply so much to the Chinese, the economic numbers out of China last night that were weak did nothing to instill confidence in the Australian economy. The fact is that many Forex traders will use the Australian dollar is a proxy for the Chinese yuan, and because of this most of the time Chinese data will have a larger effect on the Australian dollar than Australian data.
Looking forward, this hammer does look like it once the offer support but more than likely we will see a sideways slog between 1.02 and 1.03 or sell. With this in mind, we aren’t interested in buying this market, and it should be said that the weekly chart produced a shooting star last week. In general, longer-term charts will always trump the shorter-term ones and as a result we aren’t willing to buy this market even if we do see a bit of a bounce coming.
On the other hand, if we break the bottom of Monday’s hammer, we would be more than willing to sell as we think of the economic Outlook for various countries is going to do very little to help the Aussie dollar. There is still quite a bit of running to the US dollar at the moment, and we think that this will continue. We would be, especially aggressive once we got below the parity level in this currency market. In fact, at that point in time we would be more than willing to add to a short position. As for buying, it’s going to be very difficult to do anywhere below the 1.0350 level.
Written by FX Empire