The AUD/USD pair rose on Friday and even broke above the 1.04 level that we have been watching for a couple of weeks. The reason this area is so interesting is that the level is the top of a massive triangle that formed over the last month and a half in this market. The breakout is significant as it shows a real break of resistance in this market.
The triangle from the top to the bottom measures 800 pips, and as a result the projected move up now that we have broken out of this triangle would match that. The breakout point being 1.04 has this pair running towards the 1.12 level, which would be a new high in this pair.
The area saw a lot of consolidation over the last couple of sessions, and this shows a real building of pressure in the markets over the last week. The 1.07 level would be considered to be pressure to the downside, and the resistance could cause a bit of a pullback. Knowing this ahead of time however allows us to be prepared to deal with it going forward.
The breaking of the Friday range would be the “all clear” signal to buy, and we would expect the 1.04 area to act as support at that point in time. In fact, if we close on the daily chart below it – we would be concerned. But as long as we are above it, there is no reason to sell currently.
The Aussies will get a boost by the potential easing of credit and liquidity in China as they are the favorite “general store” of the Chinese. The boom that could be coming in commodities could certainly continue to push the value of the Aussie dollar higher for much longer than many people expect. Gold looks like it is ready to break out as well, and this will often be followed by the AUD/USD pair too. We are buying a break of the Friday highs, and won’t sell until we close well below the 1.04 level.
Written by FX Empire