- The Australian dollar has fallen rather hard during the trading session on Tuesday
- The AUD/USD currency pair has fallen all the way down to the 50-Day in the uptrend line at the bottom of the channel that we have been in, so it does make a certain amount of sense that we bounce the bid.
- I think it sets up for a nice trading signal from break down below the uptrend line, as the market could drop all the way down to the 0.66 level initially, and then beyond that to the 0.65 handle.
Breakdown Ahead?
The 200-Day EMA sits just above the candlestick for the trading session, and it looks as if it could offer a significant barrier in the short term. In fact, the fact that we failed at that level does make me wonder whether or not we are about the breakdown below the bottom of the channel. However, if we were to turn around and take out the candlestick for the trading session to the outside, then it opens up the possibility of a move to the top of the channel, perhaps even the 0.70 level.
The Aussie is very sensitive to the Chinese economy, which is showing signs of contraction, with the Manufacturing PMI numbers coming out in contractionary attitudes for last month. I think at this point, it’s very likely that the Australian dollar is going to continue see a lot of trouble, but not only do we have to worry about China, but we also have to worry about the commodity markets in general. Remember, Australia is essentially the raw commodity supply for China and the rest of the world, so if the global economy is going to slow down, it’s likely that the Aussie will suffer as a result.
As we are between the 2 major moving averages, it makes quite a bit of sense that we would see the volatility pickup more than anything else. The market is also going to have to deal with the jobs number coming out on Friday, which could give us a little bit more of a heads up as to where the Federal Reserve might be as far as monetary policy is concerned. The Federal Reserve will continue to be a major influence on where the US dollar is going over the next several months.
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