The AUD/USD pair rallied during the session on Thursday, but gave back almost all of the gains as it formed a shooting star. The 1.04 level continues to be far too resistive for the buyers to get above, and as such we think we are heading back down towards the 1.0250 level. With this in mind, we are more than willing to short this pair if we get below the lows for the Tuesday session.
With all of the headline risks out there right now, it’s not a surprise to see that the Australian dollar is struggling. Simply put, there are far too many things that can go wrong to expect traders to take on risk for any great length of time. The fact that today is Friday also suggests that traders will more than likely close out their positions before the weekend.
Obviously, anything can happen but this simply looks like a market wants to slip a bit lower. Interestingly enough however, the gold market suddenly look very bullish which of course is normally bullish for the Aussie dollar as well. So essentially we have conflicting signals, but the matter the fact is that the US dollar still reigns supreme, no matter how many people hate to admit that. With this in mind, it’s much “safer” to own US dollars that it is Aussie dollars when you don’t know enough about the economic situation in not only Australia, but China who of course is their biggest customer.
This is a beautiful shooting star, and as such it does suggest that we will have serious bearish pressure. The 1.0250 level looks like it could be the beginning of pretty significant noise however, and as such we think that any short position will more than likely struggle with this pair at the general level.
Over the long run, we believe the Australian dollar will continue to be wait upon by several factors, not the least of which is the fact that the Reserve Bank of Australia is expected to lower rates at least once, if not twice over the next six months. This naturally will have money leaving Australia, and into other markets.
Written by FX Empire