The AUD/USD pair tried to rally during the session on Friday, but as you can see gave back all of the gains and ended up forming a negative candle. In fact, this candle ended up being a shooting star at the bottom of a down move, which is always a very bad sign in my opinion. This means that the buyers could not pick the market back up, and that is simply too heavy for them to stabilize things.
The Australian dollar has been beat up quite drastically over the course of the last several months, as the US dollar continues to strengthen. Essentially, Australia is the "supermarket" or possibly the "general store" to the Asians, and as long as their economies are going well, so goes the Australian dollar. However, recently we've seen a little bit of sluggishness out of Asia, and without a doubt a rush to the US dollar as it appears the Federal Reserve could very well cut back on some of its quantitative easing.
If that puts the US dollar in a tightening cycle, you can expect commodities to get absolutely pummeled. This will have a massively negative effect on the Aussie dollar, as it is a commodity driven currency. Going forward, it still too early to say but it does look like we may see a much weaker Australian dollar because of the commodity markets, quite possibly because of gold as well as that market tends to be very sensitive to interest rates in the United States.
Could we possibly see 0.85?
There are plenty of pundits out there that are willing to suggest that we will see the 0.85 handle. I am one of them, but I think it's very possible that we could even see the 0.80 handle. This is especially true if the Federal Reserve does in fact taper off of quantitative easing, because that should send the value of the US dollar from the roof in general. As gold starts to get beaten-down as the scenario, you can count on the Aussie following it.
