The Australian dollar has broken out. We are clearly above the 0.75 level, as we closed almost all the way to the 0.76 level during the day on Friday. More and poorly, we broke above the top of the hammer from the Thursday session, which of course is a very bullish sign as well. With that being said, we believe that the market will continue to favor the Australian dollar over the US dollar as more and more traders piled into the gold markets. The gold markets have been strong for some time now, and it appears that the Australian dollar simply trying to catch up to the value of gold itself. With this, we are buyers of pullbacks that show signs of support.
We most certainly see the 0.75 level as been massively supportive, and of course the area just below there all the way down to the 0.74 level. Any supportive candle is reason enough to start going long as the Aussie should continue to be strong as it of course is used as a proxy by currency traders around the world. We have no interest whatsoever in selling, and believe that there is essentially a “floor” in this market somewhere around the aforementioned 0.74 handle.
We believe that the market will probably try to go all the way to the 0.0 level next, because quite frankly it’s the next logical place. This level has a long history of been vital to this market anyways, so it makes sense that we should continue to see quite a bit of interest in reaching that general vicinity. The Australian dollar is also a bit of a proxy for Asian a, which is finally starting to stabilize as well. With the recent impulsive move higher, it’s hard to imagine a scenario in which we should start selling the Aussie as it shows so much in the way of bullish pressure. With this, we are buyers on short-term dips, and of course breakouts to the upside and that should continue the momentum higher in this pair.