The AUD/USD pair initially tried to rally during the session on Thursday, but as you can see got beat back and fell below the 0.90 handle. That move is very bearish as far as I can tell, and as I have previously suggested, selling below that level is what my plan has been all along. However, I do have to admit that I am surprised to see it happen this late in the year. In a sense, that is one of the reasons that makes me believe in this move even more. The fact is, most traders do not want to put on any type of serious position this late in the year, and the fact that they did suggests to me that this move may actually have legs.
Now that we have broken below the psychologically significant 0.90 handle, we have to look at the next possible target. In my opinion, I think the market will head towards the 0.88 handle, as the Australian dollar continues to struggle overall. Part of this is going to be based upon the Australian economic numbers themselves, but more of it is probably based upon the Federal Reserve and the fact that the retail sales numbers came out so strong during the session on Thursday. That gives more credence to the idea that the Federal Reserve will have to taper, and that of course should help with the interest rate differential.
Watch Asian economies.
I cannot stress enough how much of a proxy the Australian dollar tends to be for China, and the smaller Asian countries. This is because Australia supplies most of the Asian markets with their raw materials and commodities, and the construction boom that we have seen in places like China over the last couple of decades have impacted the Australian economy drastically.
Looking at the gold markets, we could end up breaking down significantly, and possibly even below the $1200 level. If we break below there, I believe that this market will absolutely come undone. In fact, I am starting to wonder whether or not it isn't this market that's leading the gold market, and not the other way around?
