The AUD/USD pair exploded to the upside on Friday, and reaction to the weaker than anticipated jobs number coming out of the United States. By breaking through the 0.74 level, we now find this market trying to reach towards the 0.7450 level above. Ultimately, I believe that a pullback is coming, but that pullbacks might offer buying opportunities for the short-term. The Australian dollar has been very mixed and choppy as of late, so that of course makes this market very difficult to trade. I would use very tight stops, because quite frankly it’s not worth taking losses if you can avoid it by not being so aggressive. If we can break above the 0.7450 level, I think we then go to the 0.7475 level above there and then towards the 0.75 level even further down the road.
Small positions are about the only thing that you can use to trade this market. This is because it has been so volatile, and of course there are several moving pieces at the same time. Gold markets have been very strong, but at the same time the Aussie has been all but quiet to that move. Copper markets look as if they are trying to stabilize, but again the Australian dollar has done very little. I believe that the market will eventually favor the Australian dollar, but certainly that isn’t happening anytime soon. Remember, the Australian dollar is used as a proxy for the Chinese economy by currency traders as well, so you have to keep an eye on Asia as well. Ultimately, expect a lot of nauseating volatility, but eventually we will get some type of compulsive move, telling us where we are going long term. Between now and then, please be careful.
Written by FX Empire