The Australian dollar has drifted a little bit lower during the trading session on Tuesday, reaching down towards the 0.7825 handle. I think that bouncing from that level shows that there are plenty of buyers underneath, especially near the 0.78 handle, and that the uptrend is still very much intact. I believe that the Core Durable Goods Orders figures coming out so soft in the United States will also drive money away from the US dollar, so I think that the gold markets will continue to flourish, and by extension the Aussie dollar.
If we were to break down below the 0.78 level, that would be a very negative sign, perhaps sending the market down to the 0.7750 level next. However, I believe that we are more likely going to go looking towards the 0.79 level above, which is an area that has previously been resistance and support. I think that the market will eventually break above there and go looking towards the psychologically and structurally important level of 0.80 above. I think that the longer-term charts continue to show this area as being crucial, so it does not surprise me at all that the market has struggled to break above there. However, once we do break above that level experience has shown me that once we do break over this type of region, it tends to be a very aggressive move. Above the recent consolidation, I would become aggressively long of the Australian dollar. However, in the meantime I think we are simply in a “buy the dips” scenario.
Written by FX Empire