The Australian dollar had a relatively choppy session on Monday, as we continue to hover near the 0.70 level. The break out on Friday was significant, so I think we are trying to build up enough momentum to continue that move, but it may take a while as these breakouts quite often have people catching their breath. The move above the 0.7750 level was significant, and now I feel that this market is probably going to go hunting the 0.80 level above, which has been vital on longer-term charts going back decades. Because of this, I think that the market has an upward proclivity and that these pullbacks offer value. This will be especially true if the gold markets can rally as well, as the correlation between the Australian dollar and the gold markets are so high.
Simply put, buying dips is probably the only way to trade this market. I would be willing to buy a dip from time to time, and simply add to my position in small increments on the way higher. Every time we make a fresh new high, I would add a small bit to my position. As long as we can stay above the 0.7750 level, I think selling is all but an impossibility as any pullback will be looked at as value by much of the trading public. I don’t know if we can break above the 0.80 level, but I do know that the level has been like a magnet for price several times. I don’t see the reason won’t be this time, as the market certainly will be looking at history and hoping it repeats. If we did breakdown below the 0.7750 level, I would probably walk away from the Australian dollar in the short term, and let it decide where it wanted to go next.
Written by FX Empire