The AUD/USD pair broke out above the 0.93 handle during the session on Wednesday, which of course is what I've been waiting for. Now that we have broken above that level, I can say that the consolidation has now ended, and it's starting to look more and more like it could have been accumulation. Nonetheless, I see quite a bit of resistance at the 0.95 handle, so I think this is a short-term move for the moment.
Of course, the Australian dollar is highly leveraged to the gold markets, and as a result I think you will have to pay attention to what they are doing. Right now, they are consolidating, so this is another reason why think the Australian dollar won't necessarily take straight off. Nonetheless, I do see a bit of a gap between here and 0.95 that can be filled relatively quickly.
To taper or not?
This is one of those pairs that will react violently to the Federal Reserve and whether or not it chooses to taper off of quantitative easing. This is because the Australian dollar is so highly leveraged to gold, which of course will get a nice bid if the increased liquidity continues out of the Federal Reserve. On the other hand, if they do taper off, this could send this pair straight back down. That's why I think that the markets will struggle to get above the 0.95 level as people are not necessarily sure one way or the other.
It's obvious that the markets are little bit on the bullish side though, just simply because the big money is coming back into play, and they obviously want to buy risk assets at the moment. You can see the stock markets around the world showing that, futures markets as well, and most certainly the Australian dollar which has been very strong over the last couple of weeks. Going forward though, the real question is whether or not we can get above the 0.95 level. If we do get above there on a daily close, I think it's very possible that we will see parity fairly quick as it will more than likely be a reaction to the Federal Reserve.
