The AUD/USD pair initially tried to rally during the session on Monday, but found far too much resistance around the 0.93 level to continue going higher. Because of this, we ended up forming a shooting star that of course is a very negative sign, although we are sitting on significant support in the form of the 0.9250 handle. Because of this, because quite a bit of consternation when it comes shorting this market, although it certainly looks like the sellers are in charge at the moment.
With that, we feel that a break below the 0.92 level since this market lower, probably looking for the 0.91 handle, and then possibly as low as the 0.90 level. With that, we feel that there might be a short-term selling opportunity, but in the end we still think that there is plenty of support below so we have to be very careful. We recognize that the Australian dollar tends to follow the gold markets as well, and although they are a bit soft at the moment, you certainly can make a significant argument for longer-term bullishness in the gold market, which should translate the longer-term positivity with the Aussie.
The 0.90 level of course is very significant from a large, round, psychologically significant number where there will be a lot of orders placed. We feel that a supportive candle in that general area should be one that’s a strong sign to start buying, and we will not hesitate to do so as we feel that the Australian dollar has probably bottomed at this point in time. There are at one point were calls for the Aussie to go as low as 0.80, but quite frankly if we haven’t been able to do it yet, I find it almost impossible to think that is going to happen anytime soon based upon the fact that most people tend to over emphasize pullbacks and moves higher as well. It essentially is an argument of far too many people being bearish, and then at one point or another you have to wonder whether or not there’s anybody left to sell? With that being the case, we are hesitant to sell until we get below the 0.92 level, but would also be willing to buy on a break of the top of the shooting star.