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The AUD/USD pair initially tried to break above the 1.03 level on Tuesday, but failed miserably and close down towards the lows of the session. As the day ended, we formed a shooting star at the bottom of a massive fall. With the Australian GDP numbers coming out this morning, we could have further pressure to the downside build up in this currency pair.
A currently looks as if the 1.03 level is in fact going to be resistive, and as such we look at that as a bit of the trigger point. If we can get a daily close above that level, not only would it be overcome in a significant resistance level, but it would also be breaking the top of the shooting star formed on Tuesday, in and of itself a bullish sign.
On the other hand, if we manage to break down below the lows of the Tuesday session, it looks like we could make our move down to the parity level in relatively short order. This pair tends to move very quickly when there are economic concerns out there, and the Chinese economy is without a doubt one of the biggest ones right now.
The Chinese economy has been slowing down over the last several months, and this of course will affect the Australians as they supply the mainland with so much of its raw materials. As long as there is softness in China, there will be softness in Australia. Also, there is a bit of a "flight to safety" trade in selling the Australian dollar and buying the US dollar.
Looking forward, we think that the downside is the overall direction that we will see in this pair. We think that eventually parity will be tested, and possibly even broken. If we do manage break below that, we would see the 0.95 level as a major area in which to target. However, we need to see the Tuesday level give way in order to start selling at this point. Once the Australian GDP numbers are out, it will be interesting and telling to see how the Aussie dollar reacts in general.