The AUD/USD pair surged again on Thursday as the risk on trade continues. The fact that the Federal Reserve is promising to keep rates ultra low until the end of 2014 continues to put in a bid for commodities, and as the Aussie dollar is a commodity currency it makes a lot of sense that this pair finally broke out.
The triangle that is on the chart clearly had us going higher once it was broken to the upside, and it was perfectly formed at the 1.04 level - always a clean situation in which to make your trading assessment. The pair action broke out before the Federal Reserve said it was going to keep rates low, and once they did - it only rose further. However, the candlestick for Thursday is a shooting star, and this shows that the pair is likely to fall in the short term.
The 1.07 area was mentioned in previous videos as potential resistance areas, and the top of the Thursday range showed this to be true. However, with the underlying fundamentals favoring the inflation trade - this pair should only be bought. Of course, the chart can do whatever it wants, so we have to wait to see if the line in the sand gets crossed. For us, it is the 1.04 level. A daily close below that has us rethinking the whole situation with the pair.
In the meantime, we are hoping to see supportive candles at either 1.05 or 1.04 in order to buy from. The 1.04 area should be very strong, but in these types of breakouts, you often won't get back to the original breakout. This is why we mention the 1.05 level. However, with the strength in this market, we are not willing to sell this pair at the moment. The buying of Aussie on the dips is the way we are moving forward this year.
The gold markets will also be a tell as well in this market. As long as the gold markets rise, this pair will as well. The pair could become a longer-term trade as well, as the measurement of the triangle does suggest that the pair will go to 1.12 sooner or later. With that, we are looking forward to a long standing trade - assuming we are above 1.04 in the mean time. However, all things look good presently, and we are much more comfortable buying.
AUD/USD Forecast January 27, 2012, Technical Analysis
AUD/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3