By: Christopher Lewis
The AUD/USD pair has been falling for some time now. However, when we look at the overall picture, the market is actually in a strong uptrend. The recent move down from the highs is actually just a pullback to the 38.2% Fibonacci retracement level. This pullback makes sense as the market have to take a rest from time to time. However, many of my fellow traders don’t take the entire picture in, and think only of the last few weeks. In this, they only see some kind of downtrend, which actually in the big scheme of things it isn’t.
The Aussie dollar is a high yielding currency, and under normal circumstances will appreciate over time as the investors around the world buy Aussie bonds and simply hold the currency for the interest rate paid. This makes sense as it is a way to earn money in what would be the closest thing to a “guarantee” that you can get. (Assuming the value of the currency doesn’t fall apart, but at least remains somewhat steady.)
1.04 Still Matters
The 1.04 level that the market has pulled back to is still very significant. After all, it was the site of a massive breakout to the upside recently, and the top of an ascending triangle. This triangle actually measure a potential move to the 1.12 handle, and this is one of the biggest positives that I see in this pair at the moment.
Also, the stock market have had a generally positive tone to them, and the pair does tend to track the S&P 500 over time. The general mood is somewhat relaxed and confident in many part of America, so it is my belief that the Americans will probably be the driving force behind any strength in this pair.
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The Aussie has also had a bit of a “safe haven” trade to it at times lately as well, as the country is so rich in things that everyone else wants. Because of this, and the need for gold, I am bullish of the Aussie in general. I think that the market will have to close significantly below the 1.04 level for me to even consider selling. In fact, I believe that it would have to be a close below the 50% Fibonacci level at the 1.0250 area. Until then, I am buying dips in this pair, and a bullish candle at the present area has me long again.