The AUD/USD pair had a slightly bullish session on Thursday as the 1.05 level looks to hold as support again. We had formed a hammer on the Wednesday close, and this of course suggested that the 1.0450 level was going to hold as support as well. Because of this, I have written recently how this pair really looks supportive at this point in time.
Adding to the allure of the technical setup is the fact that there are several central banks around the world looks set to add to their monetary easing policies. This of course drives up the demand for certain commodities that are thought of as hard assets such as gold. The Australian dollar move is almost lockstep with gold most of the time, and as such it wouldn't surprise me to see both rise simultaneously.
Channel holding well
I've been talking about an up trending channel in this pair for quite some time now. The channel started back in June, and has shown no real signs of breaking up. The interesting thing about this pair is that we bounced off the top of the channel 2 weeks ago, but haven't really pullback. Instead of pulling back like you would expect, we've actually drifted sideways. This says to me that there is a real support in this pair right now, and there is deathly pressure to the upside.
Because of this, I am not willing to sell the Australian dollar until we get below the bottom of the channel, and more importantly below the 1.03 level which I see as massive support as well. I need to be sure if I'm going to sell something like the Australian dollar in an easy monetary policy type world.
There of course will be bumps along the road, but the Australian dollar does look set to try and make a run to the 1.06, 1.08, and 1.10 levels. I suspect that eventually we will have a wicked pullbacks, but right now the market looks like it's not interested. Because of this, I will not fight the market and only buy the Australian dollar. A break above the session highs from Thursday is good enough for me to start buying.