AUD/USD Daily Outlook Feb. 20, 2012

By: Christopher Lewis

AUD/USD has been going sideways for about two weeks now, and although the world’s stock markets are doing reasonably well, the pair has found traction a difficult thing to accomplish. The Aussie is generally a favorite of traders as the risk on attitude in the markets increases, mainly because the higher interest rates that are available for holding the currency. The lack of yield around the world is pushing people into the Australian dollar, and the pair has risen over the last few months because of this.

The Federal Reserve has vowed to keep rates low until the end of 2014, and this should continue to push money into the Australian dollar and away from the US dollar on the margin. However, in times of deep concern this pair will fall as we have seen from time to time. As the world’s central banks compete in a race to devalue their currencies, the Aussies are one of the few economies in the top-tier that seem to be okay with the idea of keeping value in their currency. This should continue to raise the trust in the Aussie as well.

1.08

The 1.08 level is a massive resistance area, and has been before. However, I don’t see this pair as a sell until much lower, possibly a sub-1.04 level. The pair has risen dramatically, and as is the case with any healthy uptrend, pullbacks should be in the making. The breaking below the 1.0650 level has this pair looking for support at the 1.05 and most certainly the 1.04 level. The 1.04 level is important as it was the top of a massive triangle that had measured a move up to the 1.12 level, which could very well be the case if the Federal Reserve has its way.

AUD/USD Daily 2/20/12

The breaking of the 1.04 level would be a serious concern for buyers, and could see a much large move to the downside. The pullback that could be coming will more than likely offer a buying opportunity at one of the handles down to 1.04 in my opinion. Of course, there is also the possibility of breaking to the upside as we rest here – and of course I am long until 1.12 at that point.

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.