The AUD/USD pair rose again on Friday to break above the Thursday highs we said would be our buy signal. The Aussie has enjoyed a lot of strength over the last several months, and this latest pullback seems to have simply been an opportunity to buy the Aussie on the cheap. With the commodity trade and the higher yields propelling the Aussie over the last several months, this has been a great trade since December of last year.
The 1.04 level seems to have held the market up, as the level wasn’t really even tested. The 38.2% Fibonacci level also came into play and pushed the AUD higher. The action on Friday has the market testing the bottom of a recent consolidation range at 1.06 or so. The pair may struggle a bit at this point, but it looks fairly clear to us that there is underlying strength in this pair, and this should continue into the near term future.
The 1.08 above is still massively resistive, and we could see another stop at that point. The breaking of that would of course send this pair massively higher. The 1.04 below was the site of a massive breakout of a triangle, and this pattern actually had us measuring for a move to the 1.12 level. We still think that we are going to see this level in the end, and will trade this pair as such until we close well below the 1.04 level on the daily chart.
The US economy is growing, and as such there should be a flow into some commodities. This pair rises when the US does well, and this should continue. Of course, China is also a part of the equation, but in reality – it is going to grow at a rate of about 7.5%, which while lower than thought isn’t exactly bad. We are buying dips in this pair going forward until the 1.04 level gives way. We like using the 4 hour chart in order to find these opportunities to buy the Aussie and continue the trend much higher.
Written by FX Empire