The Australian dollar is getting ready to drop further
After the Australian currency has been in a steady decline for the past several sessions, it has paused in the past 2 days to take a breather. Where will it go next? For now we are of the opinion that it is more likely to see it fall further towards testing 0.9200, however it remains to be seen whether we will have another test of 0.9250.
The last forecast on the forex market for this week will focus on the ratio between the Australian dollar and the US dollar. This pair has been largely sold in recent weeks, however no new range breaks have been achieved so far. The most important point if we are trying to trade here is to realize that positioning is still favoring the USD.
Yesterday's Existing Home Sales figures have disappointed somewhat on the US side of the Atlantic, whoever that did not translate into some material US dollar weakness, as most traders have shrugged off the results and are looking forward to the more important number today - the New Home Sales.
On the Chinese data front which is closely related to Australia we have seen the leading economic index drop to 0.9 from 1.2 points previously. It spells the continuation of the deceleration of the Chinese economy. With the RBA most likely staying pat for the foreseeable future, we are very likely to see interest rates stay unchanged.
Looking at the charts we are seeing the upside capped for now by 0.9250, which if broken opens up the way for the next resistance at 0.9270-75. If that is taken over we would be thinking that a more broad correction is on the way, however if we currently approach these levels, we would be buying daily puts for tonight and Monday expiry.
The more likely scenario that we see at this point is for the AUD/USD binary options forex pair to continue to the downside, eliminating all support from 0.9210 and breaking further below 0.9200 towards 0.9150 in the coming sessions.
Buying daily puts at present levels is what we have been doing on rallies all morning long, however for those of you on the safe side, look for a sustained hourly break of 0.9210 and buy puts for tonight's expiry and for Monday as well.