- The AUD/USD tried to rally at the beginning of the session on Tuesday but gave back gains rather rapidly as it somehow looks like we are in worse shape than we were a couple of days ago.
- At this point, it looks as if the market would continue to see a lot of noisy behavior, and I certainly think that it is probably only a matter of time before we continue to go even lower.
- What’s interesting is that the 0.65 level has been crushed through, and then offered resistance as we rallied during the day on Tuesday.
The resulting candlestick was an inverted hammer, which is always a bad look. However, if we break above the top of the candlestick, then it’s possible that we could see this market try to get to the 0.67 level. That’s the area that had been so much resistance previously, so I think it’s going to be more likely than not a situation where we would see plenty of “fade the rally” type of attitude. After all, the Australian dollar is highly sensitive to the commodity markets, and of course global growth in general.
Aussie Unlikely to Overtake the Greenback
If the market were to turn around a break above the 0.67 level, then it’s possible that we could see this market go much higher, but it would take a Herculean effort to make that happen, and therefore it’s likely that we would see a lot of volatility between now and then before we switch like that. This is a situation where I think you see the Federal Reserve being the major driver of what happens next, therefore it’s likely that the US dollar will be the major driver of everything going forward. As interest rates continue to spike in America, there’s no real argument to be made as to why the Aussie should overtake the greenback.
The Australian dollar also must worry about a lot of noise coming out of Asia, as many of the major customers of Australian commodities will have a lot of problems, and therefore most of Australia’s customers will be buying. What’s particularly going to be daunting is the slowdown in China, which will have quite a bit of negativity in the Australian economy showing up. Now that we are below the 0.65 level, I think we could drop another couple of handles.
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