Australian Dollar Poised For More Declines

Australian Dollar Poised For More Declines

When we look at each of the main financial markets, some of the most interesting developments we have seen have been in the currency space.  In market jargon, these markets are also referred to as the forex, and the dominant player so far this year in the space has been the US Dollar.  It can be argued that most of this activity has come against the Euro, which has met severe selling pressure against many of its major counterparts.  But Dollar strength has been widespread, and there has been a good deal of activity to be seen in the Australian Dollar, as well.

So while many investors might look to trade the potential for Dollar strength by using the the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), there are also ways of dealing with these trends by directly using the currencies themselves.  Investors with smaller account sizes will want to consider opening a mini forex trading account, as this can help to limit the potential for losses early on.  Additionally, it pays a good deal to monitor chart activity in some of the world’s most closely watched currency pairs.  When dealing with the Australian Dollar, this will often mean looking at the AUD/USD, which pits the value of the Australian Dollar versus the value of the US Dollar.  In the chart below, we will look at some of the most critical price levels that can be used for trading positions in the AUD/USD.  These levels can be useful in determining when to enter into a market and when the exit that market.

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AUD/USD – Australian Dollar vs. US Dollar

Critical Resistance:   0.81

Critical Support:   0.76

Trading Stance:  Bearish

Chart Source:  Mocaz.com

AUD/USD Forex Strategy:  Market momentum is still significant negative, so it remains a sell on any rallies that might develop later.  First resistance now comes in at 0.81.

When we look at the chart above in the AUD/USD it is relatively easy to see that most of the momentum is bearish, and there is little reason to believe that this will be ending any time soon.  Sell positions can be established on an approach of resistance at 0.81.  An upside break of this level would suggest that the downtrend might be reaching its completion.