The AUD/USD pair showed a lot of volatility during the day on Tuesday, as we bounced off the 0.74 level after a pullback. That level should offer quite a bit of support, and the market should then go much higher. Ultimately, the market should continue to find quite a bit of choppiness but I think that the Australian dollar is starting to take on the attitude of the gold markets, which suddenly look very bullish as well. Because of this, I believe that it’s only a matter of time before the buyers get involved on pullbacks and we should go reaching towards the 0.75 handle above. That’s a level that makes a large, round, psychologically important target, and I think will also offer a bit of resistance. However, it looks as if the gold markets are ready to make a much larger move, so I would not be surprised if we broke above there as well.
The importance of pullbacks
It’s very important for pullbacks to occur, because it gives us an opportunity to pick up value in a market that will probably be just as choppy as the commodity itself. After all, gold tends to move based upon several different factors, not the least of which is the “fear trade”, which has cooled off lately but could pick up due to the North Korean situation, or perhaps something out of Syria. There are plenty of reasons to think that the market will have a something happens to hell gold, and by extension help the Australian dollar. I have no interest in shorting, least not until we break down below the 0.7375 level underneath, which doesn’t look very likely as of now. It’ll be choppy, but well worth it over the longer term to be on the long side in this trade in my estimation.
Written by FX Empire