AUD/USD fell initially during the Tuesday session, but managed a comeback as the end of the day drew near. The resulting candle is a hammer, and it is currently pressing against the top of a bullish flag, and the 1.08 resistance area. The pair would be difficult to buy at this particular level, but anything over 1.08 shows that we are going to go much higher.
The original bullish move was predicated on a break out from an ascending triangle that had a top of 1.04 and pointed the way to a 1.12 high. The move was decisive, and after that we ran all the way up to the 1.08 mark where the pair stalled. However, since that time, we have consolidated just below that mark, and have formed a flag. On a breakout above the 1.08 handle, this shows a bullish flag breaking and being triggered, with a measured move to the 1.15 handle.
This sounds high, but it wasn’t that long ago that many of us thought that the AUD/USD over the 0.80 level as a bit “high”. Needless to say, that level is quite low in today’s world. A few years can make a huge difference in the mentality of a market, and there is little to suggest that the Aussie is any point of worry for investors. In fact, it is one of the favored currencies, and will continue to be as long as the central banks are pumping the markets full of liquidity. The price of gold and other “stuff” like copper should continue to rise over time, and Australia has plenty of both. Because of this, there will be a natural bid for the currency.
As for the chart, a break above 1.08 is vital for the bullish case going forward. It does look like it is only a matter of time before this level gives way, but in the meantime we could expect consolidative action between 1.08 and 1.06 or so. The fact that the pair won’t fall significantly suggests it is simply resting before the next move higher. We are buying post-1.08 on a daily close. As for selling, we have no plans at all.
Written by FX Empire