The Australian dollar has rallied a bit during the trading session on Tuesday and even made a fresh, new high. However, we have pulled back a bit later in the day, so it suggests that we are not quite ready to take off to the upside. We have seen a lot of US dollar weakness, so I do think that it is only a matter of time before we take off to the upside. I think pullbacks at this point in time should be thought of as potential buying opportunities, and therefore it is likely to continue to find buyers every time it drops.
To the downside, the 0.71 level begins significant support down to the 0.70 level, a 100 point range of previous resistance. Now that we are well above there, I think that it is only a matter of time before this pair goes much higher. After all, with the Federal Reserve going everything it can to flood the market with greenbacks, it does bring down the value of that currency. Ultimately, I think that this is a market that will find plenty of reasons to sell the US dollar going forward, and the Federal Reserve will make sure that they help as well. Because of this, I do believe that there are a lot of people looking to pick up these pullbacks, and therefore I look at this is a “one-way trade.”
It does not necessarily mean that you can jump in and buy this market right away, rather you should be looking for short-term pullbacks that show signs of support. The 50 day EMA underneath is sitting near the 0.70 level, so that is also another reason to think that there will be supported there as well. Longer-term, I fully believe that this market goes looking towards the 0.75 handle, possibly even the 0.80 level. Furthermore, you have to keep in mind that the Australian dollar is typically tied to the gold market, so that is reason enough to think that we could continue to go higher as well. With all of this, I believe that buying on the dips continues to work, and I clearly have no interest whatsoever in trying to short this market. In fact, I believe that the Australian dollar may consolidate a bit, but then take off yet again. After all, we have seen a very bullish move as of late and may be running out of short-term momentum. Longer-term though, the trend looks to be very much set.
