By: Christopher Lewis
AUD/USD has been going sideways for the last couple of weeks. However, over the last several months we have seen strength in general, and the sideways motion lately hasn’t even seriously attempted a breakdown. The strength of the trend really shouldn’t be in doubt, as the 1.04 level breaking was a significant event.
The yield that the Aussie pays over the Dollar is an attractive way to make money for longer-term investors as well, as the Treasury markets are offering so little in the way of yield. The environment that the world finds itself in makes for a great argument to own the higher yield currencies, and the theme is same for almost all of them.
The Aussie will also benefit from the commodity trade, and the commodity trade looks healthy. The Federal Reserve and many of the world’s larger central banks are all in monetary easing, and the natural reaction of the larger traders in the market will look to store a certain amount of value via “stuff”. The futures markets certainly will show that things people “need” are going to rise in value as the currency with what you buy with loses worth.
Consolidation and 1.12
The recent grind has all the classic signs of a continuation move of the large upward trend. The fundamental analysis certainly favors the Aussie against many currencies, and the Dollar will be especially vulnerable. The need to buy gold also will drive the Aussie forward as Australia exports so much gold to other nations.
.png "AUD/USD Daily 2/28/12")
The 1.08 level looks as if it is resistive, but the triangle that we saw a while ago gave way at 1.04 and this move measured a target up to 1.12 in the future. There really isn’t anything that I see that suggests the pair won’t reach it. As long as we look healthy, I am buying pullbacks in this pair. Selling isn’t an idea at the moment, and I think it will take a daily close well below the all-important 1.04 level. As long as we are above it, I am going to continue to build a large position, one small trade at a time.