The AUD/USD pair broke down after initially trying to rally during the Thursday session. What I found so interesting about this pair is that we are testing the 0.80 handle. This is an area that was massive resistance years ago, and therefore should elicit some type of reaction in the marketplace. The fact that we closed forming a shooting star of sorts suggests to me that the market is in fact going to try to break down through this area. Whether or not it can is a completely different question but it should be noted that the New Zealand dollar did in fact break down below the 0.75 level, so we can assume that may be a harbinger of things to come in this market.
The 0.80 level did cause a bit of a push back late in US trading, as there was a knee-jerk reaction to the upside. However, the market is just simply sitting there so it suggests to me that perhaps we are starting to chew through some of the support and stop loss orders that have been in place for quite some time.
Tenacity will be needed
Quite frankly, it’s going to take quite a bit of tenacity a breakdown through this level. Because of this, we may see bounces from time to time before he break down, but I think that the market will ultimately do so. It just seems that no matter what happens, the US dollar continues to strengthen. That being the case, it is a bit of a “knock on effect” that the US dollar would appreciate against the Aussie dollar, because quite frankly most of the trouble isn’t coming from Asia or the Pacific. This is a matter of the US dollar appreciating so rapidly against the Euro during the day as the European Central Bank did in fact add to its quantitative easing. Because of this, the US dollar is being bought hand over fist, and that of course affects the currency markets overall. If we break down below the 0.80 level, we should probably head to the 0.78 level. Bounces that show signs of resistance will be selling opportunities.
