The GBP/AUD pair rose during the session on Friday, breaking above the 1.87 level. This is a market that has been in a very strong uptrend, and this of course makes sense considering how the British pound has done fairly well against most currencies around the world recently. On top of that, you have the Australian dollar which is been beat up significantly, and most importantly has fallen below the 0.88 level against the US dollar, which has been a major breach of support for the Aussie. The gold markets certainly haven’t been helping the Aussie dollar lately as well, so it makes sense that we get weakness down under.
Now that we have made a fresh new high, it looks like the markets ready to continue going higher. The British pound also looks like it’s trying to break out against the US dollar simultaneously, so this is probably influenced by both the British pound itself, as well as the Australian dollar. In that scenario, this is a bit of a “perfect storm”, and therefore we should see a continuing pressure to the upside.
1.87 matters.
The 1.87 level matter simply because it was a recent high, and therefore it showed resistance previously. Now that we have gotten above the 1.87 level, I feel that the market is more than likely going to head to the 1.90 level, as that is the next major handle as far as round numbers are concerned.
Any pullback going forward will more than likely be a nice buying opportunity, and I will treat the market has such going forward. There is absolutely no reason to think that the Australian dollar should strengthen against the British pound for any length of time, and because of that I simply cannot short this market no matter what happens. In fact, I would have to see the market breakdown below the 1.80 handle on a daily close in order to even begin to think about selling. On top of that, I would have to see the Australian dollar do better against the US dollar in order to believe in its strength.
