The AUD/USD pair managed to bust through the 1.0350 level during the session on Wednesday, signaling a fresh new leg up. This suggests that the Aussie dollar will continue to rise until about the 1.05 level, and possibly even higher. There is open speculation that the Chinese and the Americans are both going to start easing again, and if that’s the case the idea is that the Chinese will be buying many of Australia’s exportable hard commodities. This of course would cause an increase in demand for the Australian dollar.
The breakout suggests that we will see another stutter step higher, and the recent consolidation area could measure this for a couple hundred pips. This is where we the target of 1.05, and as the market loves these big round numbers; it makes sense that we would stop there.
On the downside, we would need to see the 1.01 level taken out to even consider it at this point, as we see this being a broken out market at this point. The Australian dollar is heavily traded by traders who wish to express a bullish point of view on the overall economy, and global commodity prices. Since this is such a popular currency pair to trade, it is the one that most traders will follow in order to identify risk sentiment around the world. We believe this is what’s happening at this moment in time. Simply put, people were waiting for the next “sugar high” in the currency markets to happen from either the Federal Reserve, or the People’s Republic of China’s central bank.
Either way, this should push the Aussie dollar higher overall as the next round of stimulus comes about. Be warned however, that these types of moves tend to be relatively quick, and can reverse at the drop of a hat. After all, people were much more averse to losing money than gaining it. In other words, if people think there’s a chance they will lose money over time, they will forgo the higher gains and in turn higher risk assets such as the Australian dollar.
Written by FX Empire