AUD/USD Forecast: Aussie Getting Ready to Break Down

Christopher Lewis

I like selling short-term rallies, and I do believe that eventually we will revisit the lows, and perhaps even beyond there.

The Australian dollar initially tried to rally on Tuesday but gave back gains as we continue to threaten the 0.73 handle. This is an area that obviously is important, and I think breaking down below there then probably sends this market towards the most recent low near the 0.71 handle, possibly even down to the 0.70 level after that.

That being said, this is a market that has been frustrating to say the least, as we simply chop around without trying to find some type of move. The market closing at the bottom of the range suggests that we are going to go lower, but I think that it is going to continue to see a lot of noisy behavior based upon the fact that although the China situation is causing a lot of “risk off behavior” in the marketplace, the reality is that the Australian dollar is highly correlated to commodities, which Wall Street just simply will not drop. That being said, the market is going to eventually have to come to terms with what is going on in the world, meaning that eventually the US dollar will strengthen against its currency as well.

The US dollar has been strengthening against most currencies, so at this point it is likely that we would see the Aussie fall victim to this as well. The Australian dollar has no business being strong, so a break down from here makes sense. The 50-day EMA above is sloping lower, and sitting just above the 0.7330 level. At this point, I think it is only a matter of time before we go much lower as the yields in America continue to strengthen and drive up demand for the greenback, something that I think you will see quite a bit going forward. With this, I like selling short-term rallies, and I do believe that eventually we will revisit the lows, and perhaps even beyond there. If we were to break above the 0.74 handle, then I might be a buyer but even then, I would have to look at the entire situation. The Aussie continues to be one of my favorite shorts against multiple currencies, not just the US dollar.

AUD/USD

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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