AUD/USD rose on Thursday as the bottom of the recent consolidation area held true. The 1.06 level looks very constructive at the moment, and the market simply couldn't break down through it. The continued weakness of the US dollar is to be blamed at this point, and the strength in the commodities markets certainly will help the Aussie as the central banks around the world continue to print fiat currencies.
The need and desire to own stuff continues to help all commodity currencies, and the Aussie is by far the most liquid of them all. The recent break out above the 1.04 level was a significant one as the level was the top of a triangle. The triangle measured up to a target of 1.12, and the way this pair has acted does little to distract from the possibility.
The 1.08 level has been a lid on this pair lately, but the truth is that the pair has been higher in the not so distant past, and the area should eventually give way as the economic picture continues to improve for the US. The continued pushback in this pair just shows how pro-Aussie the Forex markets are at the moment. Every time this pair falls, it simply bounces back up.
The breaking of the highs from Thursday should lead to the 1.08 level, and it is there that we will see the real struggle start. The daily close above that level will signal a bigger move up for the bulls, and this is something we fully expect to happen before it is all said and done. With this in mind, we don't like selling at all now, and especially if we remain above the 1.04 level.
If the daily charts close sub-1.04, then we would have to rethink our thesis at that point. However, this looks very unlikely in the near-term, and as far as we can tell - there are few reasons to think that the flooding of liquidity into the markets is going to stop anytime soon. We buy the Aussie on dips, and on a break of the Thursday highs.
AUD/USD Forecast February 24, 2012, Technical Analysis
AUD/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3