AUD/USD Daily Outlook May 31, 2012

Christopher Lewis

The AUD/USD has been a pair that has been absolutely beaten up over the last several weeks. It was just a couple of months ago that it was trading at the 1.08 level, and the fall has been stunning up until this point. The pair is suffering because of the rest of the world, not anything out of Oz itself. Because of this, Aussie bulls must be frustrated to say the least.

The Aussie will often be used by the Forex community in order to make a play on the Chinese economic situation, and as a result – when trouble is found on the mainland, the Aussie falls. With the European situation killing demand out of that area, China suddenly finds out that its biggest customer is flat broke. With that being said, there is much less demand for Chinese goods, and this in turn means there is less demand for raw materials out of Australia.

The fall has been stunning, but quite frankly the European situation is only getting worse at this point. Because of this, there is a real chance this pair falls even further. The recent area that the pair trades in at the moment would be a complete round trip since the move up in November 2011. This is a very bearish sign, and a break lower, below the 0.97 level – has this pair falling to 0.90 before it is all said and done.

0.9650 is crucial

The 0.9650 level is absolutely crucial at this point. If it gives way, look out below. The pair looks like a perfect place to express a run to the Dollar, and while the Euro has been getting all of the attention, the Aussie has been a cleaner play on the Dollar. There is little to suggest that this is going to change anytime soon.

AUDUSD Daily 53112

I am selling all rallies in this pair until we are above the 1.02 level. The breaking to new lows will also have me selling as this pair simply cannot find its footing. I am looking to add all the way down as well, as this could be a massive move still waiting to happen.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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