The AUD/USD pair fell during the course of the day on Friday, testing the 0.80 level. Ultimately though, we ended up bouncing enough to form a nice-looking hammer and it appears of the market is going to continue to go higher. This coincides nicely with a significant move higher in the gold markets, which of course can move the Australian dollar as well. The US dollar continues to soften in general, so it makes sense that this market should continue to go higher. We have recently broken out above the 0.80 level, and we are now testing that area for support which of course appears to be coming into the marketplace.
A break the top of that hammer, we feel that the market will then head to the 0.82 level, and then perhaps higher than that. The market has been bullish for a while, and we believe that it will remain so although as we are changing trends possibly, it will be very volatile as far as movement is concerned. There is no reason to think that you can sell this pair right now, because underneath the 0.80 level, there is a massive amount of noise. That should translate into support, as gold markets and an oversold Australian dollar should dictate that we go higher given enough time.
If we get above the 0.82 level, we think that the market will then go to the 0.85 level, which is the next large, round, psychologically significant number higher. We don’t really want to sell this pair, but would have to consider doing so we get below the 0.78 level as it would show a significant breakdown in momentum. It would also show that quite a bit of support had been chewed through, and that we could end up going much lower given enough time. However, as the market continues this move higher, it becomes more and more likely that we have seen the bottom as far as this particular market is concerned, somewhere near the 0.75 handle. At this point in time, we are “buy only.”
