The AUD/USD pair fell during the session on Tuesday, but bounced in order to form a hammer. As you can see, the 0.90 level has offered support and now we have to wonder whether or not there isn’t some type of base building in this market. It’s far too early does suggest that right now, but it is easy to see where the support has been centered on the 0.90 handle. There was an attempt to break it down below there, but as you can see it did not stay very long.
This sets up an interesting chart in our eyes. The 0.90 level now becomes massive support, and a move below that would have us selling this market as we now think it is even more important than we initially thought. The Australian dollar has been very weak over the last several months, so it wouldn’t be overly surprising to see a breakdown, and if it does we think we could go as low as 0.85 handle over the course of the next couple of months. Right now, we are in the dead of summer, so the liquidity just isn’t there in the marketplace so it’s difficult to make a massive assumption at this point time, but without a doubt there is obviously something going on down in this region.
With all that being said, we feel that this market is going to be one of the more interesting ones this fall, and that paying attention to what it does of the next several sessions will probably be crucial. We think that the consolidation area is essentially bordered by the 0.90 handle on the bottom, and the 0.93 handle on the top. We are willing to ignore the break down below 0.90 for the time being, as it could very well end up being a “false breakdown.” That would be the first time that we’ve seen that and a pair like this, and you have to keep in mind that the Federal Reserve and its quantitative easing program will be on the front burner for Forex traders. That being the case, commodities will be affected greatly, which of course greatly affects the Australian dollar.
Written by FX Empire