Short the Australian dollar, technician says, it's heading for 2008 low

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The long, steady decline of the Australian dollar – and the Australian economy – continues.

After months of sitting on the ledge of the valley of death, hovering near $0.715, it's been given a push over the edge by concerns over China's growth, and given a kick on the way down by the continued fall in commodity prices, including oil, gas and iron ore.

So, just how low can this negative sentiment, coupled with relentlessly negative Reserve Bank of Australia jawboning, send the Aussie?

The prolonged, steady downtrend in the currency is well defined using a Guppy Multiple Moving Average (GMMA) indicator.

The long-term GMMA is well-separated, showing consistent investor selling into the rallies.

After the September 2014 fall in the Aussie, no subsequent rally, including those in May and December 2015, caused any compression in the long-term GMMA; the bears have been the kings.

The Aussie trades in bands about $0.08 wide, which we've used to set the downside targets in the trend.

This provides a downside target of $0.715, which has been achieved and exceeded.

Overshooting $0.715 was temporary, though, and the Aussie developed a sideways consolidation around this level between September 2015 until just a few days ago.

The current fall below $0.715 is the signal for a resumption of the downtrend.

But, what's different between now and the previous fall below $0.715?

This time the Aussie has moved away from the lower edge of the long-term GMMA that has previously acted as a resistance level.

This is not an overshoot of the $0.715 target; it's a reaction away from the resistance features of the downtrend.

We use the ANTSSYS method to trade the sustained falls below the $0.715 level.

The next downside target is near $0.635.

The last time the Aussie was at $0.64 was in 2008, at the depth of the global financial crisis, when the Australian market index was at 3,300 points.

By the way, the Australian currency collapse also confirms a short trade in the benchmark ASX 200, with a target near 4,650.

The target is calculated from the head-and-shoulder pattern in the Australian Index.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, available at www.guppytraders.com.. He is a regular guest on CNBCAsia Squawk Box and a speaker at trading conferences in China, Asia, Australia and Europe.