The AUD/USD pair rose during the session on Tuesday, but as you can see the 1.04 level continues to be far too much in the way of resistance for this pair to continue higher. However, I do believe that eventually will breakout above that level, as it is only the "middle line" of a larger rectangle that we have been trading in for roughly 17 months.
The gold market could be the catalyst for the Australian dollar to continue higher, as it looks like it is trying to breakout above the $1500 level. If that does happen, I cannot help but believe that the Australian dollar will get quite a boost. Although it has essentially decoupled itself from gold recently, over the longer term, the two do tend to move in tandem.
The fact that we formed a bit of a shooting star like candle for the session on Tuesday suggests to me that we are not quite ready to breakout. We might, but I am going to wait until a daily close above that 1.04 level anyways. A pullback at this point time does not invite selling as far as I am concerned, because I believe that in the long run the Australian dollar will continue higher. After all, the Federal Reserve continues to keep an easy monetary policy stance, and with the jobs number coming out of the United States this Friday, we could get more fuel to that fire if there is a poor number.
"Risk on, risk off"
This pair has been kicked around by the whole "risk on, risk off" attitude of the markets. Ironically, the stock markets in the United States and done extraordinarily well while the rest of the markets have been basically bouncing around from day-to-day. That being said, the Australian dollar is the "go to" trade for a lot of investors looking to gain yield in "risk on" environment. I don't see that this is going to change anytime soon, and as a result this will continue to be a highly emotional trading pair. As far as selling is concerned, I would need to see a significant break down below the 1.02 level in order to consider it.
