The AUD/USD pair tried to rally during the session on Tuesday, but found enough resistance near the 0.8950 level to turn things back around and form a shooting star. The shooting star at the bottom of a negative move almost always means that we will eventually see some type of continuation of the down though, and as a result I think that we are going to test the 0.88 support level. A move below there signifies continued weakness in the Australian dollar, but at the same time we break the top of the shooting star, it’s very possible that we might continue to bounce towards the 0.91 handle.
The Australian dollar is probably going to continue to suffer at the hands of a very weak gold market, as the two markets tend to follow each other. Gold is certainly not doing any favors for the Australian dollar, and as a result it’s hard to believe that the Australian dollar is going to find significant support by traders overall in this general vicinity.
However, it is an oversold condition.
Regardless of any of that, I do recognize that we are certainly oversold at this moment. While I do think that the US dollar will be favored over most currencies around the world, it would not surprise me at all to see a little bit of a bounce from here. I think that short-term in nature at best, and with that I would be more than likely to sell rallies as they appear. Short-term charts will continue to lead the way as far as I can tell, and I will continue to sell on rallies the show signs of failure.
I have no confidence in this market going forward as far as buying is concerned, until at least we get above the 0.91 handle, which at that point time would show a significant change in momentum. If we get above there, I think the market would then head to the 0.94 level. Regardless, I don’t that’s going to happen and I think that rallies will build up enough momentum eventually to break down through the significant support.
