The AUD/USD pair fell hard during the course of the day on Thursday, breaking below the 0.88 level. This is an area that I had anticipated being somewhat supportive, so the fact that we broke down below it signals to me that we are in fact going to continue going lower given enough time. The next support level that I see is the 0.86 level, and most certainly the 0.85 level.
I have no interest whatsoever in buying this market, at least not until we test a more significant support handle. The fact that we broke through the 0.88 level of course is very negative though, and as a result I am very hesitant to start buying. After all, the gold markets certainly are not helping the situation either, as the Australian dollar is so highly leveraged to that particular market. The gold markets are trying to test the $1200 level, which breaking down below there would in fact be very negative overall.
The gold and Australian dollar correlation
I believe that the correlation between the two of these market should continue to drive the market overall, and there is a bit of a “double whammy” in this situation as the US dollar is the reason why both the Australian dollar and the gold markets or falling. If we can break down below the $1200 level, I think that is the extra push needed to really move this market lower.
Sometimes, one of these markets will lead the other one, and I feel that the Australian dollar may be doing that as far as gold is concerned. Because of that, I feel that it’s only a matter of time before this pair breaks down significantly and as a result I am bearish of both the Australian dollar and the gold markets. The pair will rally from time to time, but I think that each one of these rallies will end up being nice selling opportunities at least until we get down to the 0.85 handle. If we broke back above the 0.90 level, at that point in time I would be comfortable buying.
