The Australian dollar has been very choppy during trading on Monday, as we came back from the weekend. We are bit overextended after the huge move over the last couple of sessions, so a pullback or a bit of a reversion to the mean would make sense. I suspect that the 0.78 level underneath is going to act as support, so I believe that it’s only a matter of time before the buyers come back. Overall, I believe that we will go looking towards the 0.79 level above, and then eventually the 0.80 level as it is a magnet for price longer term.
If we were to break down below the 0.78 handle, it’s likely that we would unwind down to the 0.77 handle below. I expect a lot of noise, but at the end of the day I recognize that gold markets will have a major influence on the Australian dollar as well, as they typically do. If we can get gold to start rallying, that will provide even more upward pressure on this currency pair and send us towards the 0.80 level again. If we break above there, the market should then go to the 0.81 handle after that, which was the recent high. I would anticipate a move above there to release the floodgates to continue to go higher, perhaps reaching the 0.83 level next. Pullbacks of this point continue to offer value from what I can see, and I will treat them as such.
Written by FX Empire