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The AUD/USD pair fell significantly during the trading session on Tuesday as the Reserve Bank of Australia cut rates in the middle of the night. While the general thought was that the RBA would have to cut sooner or later, it seems to have caught several the participants in the market off guard, and as such they found themselves selling rapidly.
The 1.03 level gave way as support, and now we're going to fall much lower in trying to find the parity level. At this point time, 1.03 should end up being resistance, and as such we will sell weakness in this general vicinity. However, the Federal Reserve is expanding its quantitative easing policy as well, and as such this shouldn't be much of a meltdown, rather a slow grind lower.
The candle for the session on Tuesday is long and closing towards the very bottom, so this of course means that there is more than likely going to be some type of continuation lower. Because of this, we would also sell a break of the lows from the Tuesday session as it would suggest that the market will at least attempt the 1.0150 support level directly below. However, looking at the longer-term charts we believe that the parity level is a much more likely target over the long run.
One of the crosscurrents of this move will of course be the gold market. While this is going on, the gold markets seem to be fairly strong and look very likely to break out to the upside. In a sense, this may be a bit of a choppy move lower, because of the various competing factors around the world. One of the biggest hindrances without a doubt though is going to be the Chinese economy in the fact that it is slowing down. Remember, the Australian economy is highly tied to the Chinese economic situation.
We like selling rallies on the short-term charts, but think this market will more than likely be very volatile in the short-term. Because of this, longer-term charts trading this could be difficult to do, and as such we will take little bite-size pieces out of the market on the way down.