The Australian dollar fell initially on Monday, reaching below the 0.78 level momentarily, before bouncing. This is an area that begins a significant amount of support extending down to the 0.7750 level, so I do expect a bounce. If Gold markets can rally as well, that should continue to give this market a bit of a boost, perhaps reaching towards the 0.80 level longer-term again. That level has been massively resistive as you know by now, and of course longer-term has been important on charts going back decades. I believe that we are trying to build up enough momentum to finally go higher and reach above the 0.80 level for good, but in the meantime, we will continue to see a lot of volatility.
If we were to break down below the 0.7750 level, that would be very negative for the Australian dollar, perhaps sending it down to the 0.75 level next. Alternately, if we break above the 0.80 level for a significant move, I suspect that we go to the 0.90 level next, and then eventually parity. This 0.80 level has been massive in its implications, and essentially the all-time “midpoint” between the two currencies. Obviously, gold and copper will have their parts the play when it comes to the value the Australian dollar, but don’t forget that the Asian economies of course have an influence as well, as there is a major correlation between the Australian dollar and those economies as Australia provide so much of the raw materials for them. I think that a lot of traders use the Australian dollar is a proxy for China, so of course their economic announcements have a lot to do with where the Aussie goes also. Longer-term, I think that we do go higher but it’s going to be very noisy in the meantime.
Written by FX Empire