The Australian dollar gapped lower at the open on Friday, and continued to grind sideways after that. We have filled the gap since then, so I think we can continue to go higher if given the opportunity. However, over the last 3 days we seen a slow grind lower, which is quite common in an uptrend when you are trying to build up enough momentum to continue going higher. We do a little bit of “back and feel”, and then eventually have a reason to go higher. Gold has been falling which of course doesn’t do the Aussie any favors, but ultimately it looks as if the 0.75 level underneath will offer a significant amount of support that should keep the uptrend intact.
I believe buying dips is the way to go, but you’re going to have to be patient to therefore I would do it in small increments. Eventually, the market should go looking for the 0.80 level above which is a major area on the longer-term charts, and a nice target for longer-term traders. Between now and then, we will get a bit of volatility, so by keeping your position sizing small and adding to it as the trade goes in your favor, you can avoid the psychological discomfort of a grinder like we see right now. A move above the 0.7550 level would be significant in the sense that we have broken above the top of the slight downtrend and channel that we see on the hourly chart. I have no interest in shorting, but if we break down below the 0.7500 level, I would have to rethink the entire position as it would be a negative sign for the Aussie, at least short-term.
Written by FX Empire