AUD/USD fell during the session on Tuesday as the rounds on risk assets continues. Bad news out of Europe pushes down the risk appetite around the world for traders, and as a result the Australian dollar pays.
Looking at this chart, I can see a lot of different things going on, but one of the most obvious things is that we've been climbing a wall of worry so to speak. This is often the case when the markets try to rally after significant headwinds, long, and as such it has been difficult to be long of these riskier currencies.
For myself, I have been avoiding the Australian dollar in general, not because I have anything against the Aussies and their economy, rather I don't trust any quiet times in the headlines these days. As the European situation gets worse and worse, it's very likely that global slowdowns will continue to punish the Australians as they are suppliers to all things Asian when it comes to commodities.
Up trending channel
On the chart attached to this article, you will see that there is an up trending channel that looks pretty obvious on this latest rally. The Tuesday candle not only trying to rally above the 1.03 level, but it turned around and is closing at the absolute lows for the day. It also happens to be sitting on this uptrend line, and if that gives way - I fully believe this pair will crumble back down to the parity level. In fact, it would not surprise me if the daily candle which by my broker will be closed in two hours, ends up closing below this line.
I think real questions of the Aussie will be asked at the parity level. It could produce a bounce granted, and as such I will be very careful once we get down that level. However, I suspect the parity will give way eventually, clearing the way for the 0.97 level. This may not happen today, or even tomorrow - but at this point in time is difficult to envision a risk positive environment in the near term.