- The AUD/USD currency pair has already broken through significant long-term support, but then broke down below the bottom of the hammer from the previous session to show even more weakness on Friday.
- It looks like we are going to continue to see a lot of negative pressure here as the US dollar is by far the strongest currency in the world.
- The Australian dollar of course is very highly correlated to commodities and the overall growth picture of the world right now, and therefore it’s likely that we go much lower.
Negative Scenario Ahead
The size of the candlestick shows just how negative things are, and I think that continues to be a sign of just how ugly things are going to be. In fact, we are threatening to 0.65 level toward the end of the day, and that tells me that people are remaining very bearish, and it’s difficult to imagine any scenario in which people would get bullish. New paragraph when you look at the longer-term charts, the breakdown has been rather important, so we do need to pay close attention to the idea of rallies as a potential opportunity.
You should be looking for cheap US dollars going forward, and every time this market rallies, that’s exactly what it’s offering. At the first signs of exhaustion, I am more than willing to continue shorting this market. I do think at this point we will more likely than not continue to see more of a “fade the rally” type of situation, as the Federal Reserve remains very tight, and of course inflation continues to rage in the United States. After all, the market is likely to continue to see that the central banks around the world are going to have to tighten monetary policy due to inflation globally. That is not good for commodities, nor is it good for Australia.
It’s probably worth noting that the policy is highly levered to the Chinese mainland as well, so that is most certainly worth paying attention to what’s going on there. The Chinese economy is in serious trouble, and I do think that it is probably only a matter of time before that continues to weigh upon the Aussie as China is by far its biggest customer. If your biggest customer is in trouble, so are you.
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