The Australian dollar rallied significantly during the trading session again on Monday, reaching towards the 0.7250 level before pulling back ever so slightly. This shows that there is still plenty of buying pressure underneath and it is probably only a matter of time before we break out. The Federal Reserve continues to flood the markets with liquidity and that drives down the value of the US dollar in general. As long as that is going to be the case, it makes sense that the Aussie will eventually break out to the upside. In fact, the Australian dollar has been one of the better-performing currencies as of late.
Just below current trading, I think there is a significant amount of support starting at the 0.71 level, extending down to the 0.70 level. Ultimately, this is a market that will continue to find plenty of buyers underneath, as the market has been resisted in that area for some time. Ultimately, it looks as if there will be plenty of buyers in that general vicinity is, so I like the idea of buying dips. The market will continue to be very noisy, but ultimately, I think we will get a significant move higher as the pressure continues to build.
Another thing that is pushing this market to the upside is the fact that the Australian dollar is so highly levered to the gold market. If gold continues to show the bullish pressure that we have seen, then it makes sense that we should continue to go much higher, perhaps reaching towards the 0.75 handle. Ultimately, the market continues to see plenty of buyers on pullbacks, but that does not necessarily mean that we are ready to break out to the upside. This is a market that I think has plenty of catalysts to go higher, but most importantly is the Federal Reserve. It is not until we break down below the 0.68 level that I would be a seller, as the 200 day EMA sits at that will. If we were to break down below there then things can change for this pair, reaching down to much lower levels. Ultimately, this is a bullish market and I have no real thoughts of trying to short it unless something changes quite drastically. Buying on the dips has worked for quite some time and should continue to.
