AUD/USD Daily Outlook Aug. 14, 2012

Christopher Lewis

The Australian dollar had a negative session on Monday as traders sold off risk appetite for the session. However, this market has a substantial amount of support at the 1.05 level, and it did in fact hold. This isn't surprising to me, and I suspect that we will continue to see Australian strength based upon several fundamental factors out there.

For starters, the central banks around the world are about to start easing their monetary policy. With this in mind, it's very likely that we will see gold markets start to heat up. Copper will more than likely do so as well, and both of these metals are very tight to the price of the Australian dollar and vice versa. In other words, as the price of gold rises, so does the Aussie.

Top of the channel, sideways action

This currency pair is in a very obvious uptrend channel as of late June. In fact, this is one of the more definitive patterns in the currency markets right now, and has by far been one of the most reliable. Looking at this chart, what impresses me the most is that we have recently hit the top of the channel and formed a shooting star that had failed at the 1.05 level, yet here we are.

The fact that the market hasn't sold off in trying to find the bottom of the channel shows me that we aren't having the usual pullback, rather we are having a rest. This is a huge difference, and when we see these moves not get pulled back, this normally means that pressure is building to the upside.

My suspicion is that the central banks will make sure that the Australian dollar gains through their monetary policy. Because of this, I am not willing to sell the Australian dollar and am willing to buy on dips going forward. In a strange sense, I think the Australian dollar is starting to undergo a very fundamental change. In some ways, it is become a safe haven currency at the same time as being a high risk one.

AUDUSD Daily 81412

I am buying pullbacks that show support at the 1.05 level, the 1.03 level, the bottom of the channel, and would also buy a breakout above the 1.06 level. As for selling, I would need to see the 1.03 level give way in a decisive manner.

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.

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