By: Christopher Lewis
AUD/USD rose during the session on Wednesday as the world continues to search for yield. The Federal Reserve announced that the interest rates in the United States would remain ultra low until the end of 2014. The Dollar-weakening move will continue to favor commodities, and is especially good for gold, of which the Aussie dollar will often follow.
The higher rate in the Australian dollar will also allow traders to collect positive swap, and as long as the Fed keeps rates this low, this should continue to propel the markets forward. The gold markets had a very significant move during Wednesday, even going so far as to smash directly through the $1,700 level that was initially thought of as significant resistance. The fact that it didn’t even hesitate shows just how weak the Dollar is about to get against gold, and by extension – commodity currencies.
1.12, Here We Come!
The triangle that got broken to the upside just a few short days ago measured to a move of 1.12, and at that point in time I thought it was a bit rich in its valuation. However, after the Fed’s move, and the fact that we are looking at two more years of low rates minimum, this no longer seems that unimaginable.
The pair looks set to continue higher, and the candle from the session on Tuesday looked like a retest of the 1.04-ish area, and even looked like a hammer. The level looks as if it is a confirmation of the breakout, and as a result I am no longer even looking for shorts in this pair. In fact, I am thinking most of 2012 will be Aussie positive.
The 1.07 level will come into play as the first serious chance of resistance, abut it will merely be a blip on the road to 1.12 or so. The market will be one I plan to go to time and time again on dips. I think this pair could be very profitable going forward. I will not sell until we see a significant breakdown below 1.04 on a daily close. Any dips on the short time frames have me buying, and so does a break of the highs form Wednesday.
