The Australian dollar initially fell during the day on Friday, but turned around to show extreme amounts of bullish pressure. However, there is still a lot of resistance at the 0.80 level above. If we were to break above that level, and more importantly closable there on a daily candle, I would be more than willing to serve buying this market as it would be a major breakout. The Australian dollar should then go much higher, as the market has respected this level for decades. Once we get above the 0.80 level, my longer-term target is parody, but obviously that will take a significant amount of time to get there. That then becomes a bit of an investment.
Gold markets continue to rally overall, and that of course helps the Aussie dollar, but we need to see an explosive move in gold to continue that rally. I think that a move above $1400 would be the sign that the Australian dollar is going higher and by many handles. With that being the case, I am always paying attention to this pair, but I’m not willing to put money to work quite yet. I believe that eventually the buyers will overcome the 0.80 handle, but I don’t want to be early on this type of trade as you can pull back 100 pips in the blink of an eye. The rout of the US dollar has been quite profound, and I think it will continue to be a main market theme over the next several months. However, if we find ourselves struggling at the 0.80 level, and perhaps breaking down to a fresh, new low, we may go much lower at that point. I believe that we are at a major inflection point when it comes to the Australian dollar. This could end up being one of the biggest trades of the season.
Written by FX Empire