The AUD/USD pair rose during the session on Friday as the 1.04 level continues to act as a magnet to price. Going forward, this pair could be very bullish of we managed to get over the 1.05 level however. .06 is the top of larger consolidation zone so of course that would have to be overcome but more than likely if we continue to grind higher, we could see a nice year in rally and risk assets in general, the Australian dollar included.
With all this being said, gold markets will certainly have an influence as well as they typically do, and it should be said that the gold markets have broken out to the upside. With that in mind, we think that the risk is to the upside, but it until we see a print above the 1.05 level it’s hard to be overly excited about going long of the Australian dollar.
There is always the interest-rate differential, and the fact that the RBA chose not to cut rates recently suggests that perhaps the Australian economy is a bit more stable than people thought. This is also a reflection on the exports of minerals from Australia, which is a reflection upon global demand and manufacturing as well. If this is the case, then we should see continued strength in the Australian dollar going forward.
On the other hand, if we managed to break down below the 1.03 level we think this market could move to 1.02 and lower. This would be a failure to reach the top of the larger consolidation area as well, and that’s never a good sign for the buyers. If that does happen, we are more than willing to get aggressively short the Australian dollar as it will be one of the most beat up currencies if we have trouble with risk appetite. In order to play the Australian dollar correctly, it is quite often desirable to follow commodity markets in general, and that is exactly what we will do. As commodities rise, it should increase the odds of a bullish Australian dollar market.
Written by FX Empire