The Australian dollar continues to under perform against some of its peers, and doesn’t enjoy QE3 in the same manner that it enjoyed QE2.
AUD/USD managed to break important resistance, but this was short lived. Downtrend resistance is still in play.
1.06 was a stubborn peak during July and August. The pair then fell as low as 1.0167. When the US dollar began retreating across the board, the pair recovered, but downtrend resistance (which began in February) was breached only for several hours:
The Australian dollar is suffering from the Chinese slowdown and the issues in the mining sector. This sector had a huge success, but it is now suffering from a lower demand and perhaps from overcapacity. Projects have been cancelled and talks about “the end of the mining boom” have been in the headlines.
The Aussie was already left out of the celebration before the long awaited Fed decision. Downtrend resistance was noted already then.
The announcement of QE3 in the US sent the US dollar to the ground (devaluation), but the Aussie wasn’t able to sustain the breaks. When QE2 was announced in November 2010, AUD/USD rallied through parity.
The COO of PIMCO, Doug Hodge, added fuel to the fire by saying that the Aussie was “coming off the boil”. Indeed, the pair was unable to hold on even to 1.05. Significant support is at 1.04, followed by1.0230.
For more, see the AUD/USD forecast.
The next big events are the release of the RBA Meeting Minutes and Chinese Manufacturing PMI.