By: Christopher Lewis
AUD/USD caught a bit of a bid on Thursday as the trading community looked for reasons to sell the US dollar. The pair is a good barometer on global risk, and the commodity markets as a whole. The gold markets rose, which is often positive for the Aussie, and the stocks markets remained extraordinarily resilient after initially selling off in the Americas.
The pair has been bullish lately, and to be honest – a bit of a surprise to me with its strength. I can think of several reasons why anything risk related should be sold, but this rule doesn’t seem to apply to the Australian or New Zealand dollars presently. Instead of worrying about the why of something, sometime it is simply better to just go with the flow and ignore any “logic” in the Forex markets.
Looking at the overall market sentiment, it appears that there is going to be a bid for commodities as a whole, and this could be part of the recent push in this pair. There is also the concept of the Chinese possibly easing their monetary policy, and that leads to expansion, and expansion in China means Chinese companies and governments buying Australian resources. Perhaps this could be the reasoning, but as mentioned above – it isn’t worth worrying about.
What the Charts Say
As far as the charts, we are seeing an interesting situation appear in this pair. The recent grind higher has the market forming a bit of an ascending triangle, and this of course if typically bullish. The fact that the lows are getting higher even with the pressure to the downside (at 1.04) suggests that the pressure is building and it will often act like a beach ball being held underwater, once it is released – it springs much higher in short order.
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However, the triangle isn’t broken yet, so buying at this point isn’t advised. We need to see a daily close above the 1.04 handle in order to see an opportunity to buy this currency. The breaking of the uptrend line in the triangle would be very negative, and more than likely have the market falling back to the bottom of the shape. I am still open to either direction, and I will let the daily close outside of the pattern dictate which direction I will be trading this pair.