The AUD/USD pair has been beaten up pretty badly over the last several sessions. The risk appetite around the world continues to deteriorate, and as long as it does, the Aussie will suffer for it. The commodity markets all look weak, and as a result the Aussie will too.
The breaking below of the 1.02 level was our first sign that this pair was about to make a move. The bottom of a bearish flag lined up with that area, and as a result I figured it was time to sell. The pole of the flag measures a move down to the 0.96 level, and because of this I am still looking to be short of this pair as the headline are certainly negative at this point.
The copper and gold markets are especially weak, and as long as that is the case, the Aussie will remain under pressure. After all, the Aussie is highly correlated to both of them. The breakdown continues to put pressure on all things risk related, and the Reserve Bank of Australia is expected to continue to ease going forward. Adding to that the fact that the Chinese economy is slowing down suggests lower rates for this pair as well.
Bounce coming?
The candle for the Wednesday session looks a lot like a hammer, and the bounce in the afternoon suggests that we may be seeing a bit of short covering rally in the near term. However, this will only be a chance to sell this pair form higher levels as the problems around the world aren’t going away anytime soon.
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The Dollar is by far the world’s most loved currency at the moment, and as such we aren’t ready to buy this pair. The Aussie will fall much lower if the economic indicators look weak going forward, and that seems almost inevitable. With all of this being said, a bounce should have the market simply setting up for my next short as long as we are below that 1.02 level I mentioned. The 0.96 level seems far away, but it wasn’t that long ago that the 0.80 level was thought as impenetrable.