By: Christopher Lewis
AUD/USD fell on Friday as the Dollar continues to pick up steam. The pair has recently seen a surge as the Aussie has enjoyed a bit of a safety status as it offers a bit of yield in a world that has little. The pair however, is tied to the commodity markets as well – something that could hinder it going forward.
The commodity markets are going to be a mixed bag by the looks of things. The Dollar is rising, and in certain markets that can be very bearish. The pair is often sensitive to headline risks as well, and as long as we find ourselves in the current situations, this will always be a threat to the health of the AUD/USD markets.
The pair has been sideways with an upwards bias lately, but there is a gap from November that has yet to be filled. This almost never happens in the Forex markets, and it is because of that fact that the pair could also see a fall. The gap being filled would have the market down at the 0.74 level and in this environment – it isn’t that hard to imagine some headline coming out that sends everyone into the US Treasury markets.
The Grind
The commodity markets will grind a lot this year. Traders will find themselves looking for something to store value as many governments around the world will either insolvent, or printing money. The pair has been a bit slow to move lately, which is something unlike the usual behavior.
The 1.05 level above looks resistive at this point, and although the parity level is below, it is only somewhat important. The parity level has been seen several times, and every time this happens it will diminish the psychological effect on the market. The gap at 0.74 to 0.75 will be the ultimate support, and this pair should continue to follow various other markets such as gold. With this in mind, we could see a slow grind higher, but in a few weeks we should see a reversal as a break of 1.05 in this kind of environment seems highly unlikely. The braking below Friday’s low would be a sell signal as well. I am waiting to see this market rise a bit before selling unless we get sub 1.02 in the pair.