The GBP/AUD pair fell again during the session on Friday, approaching what I see as a fairly significant trend line. I believe that the British pound isn’t necessarily going to be a strong currency, but the Australian dollar will more than likely be softer in general. After all, the Aussie is more or less a commodity currency, so it’s really difficult to imagine that it’s going to take off to the upside anytime soon. With fact, I believe that this is simply a situation where the British pound is “less bad” than the Aussie.
Looking at the trend line, you can see that it has been approached several times, and has held up every time previously. Because of this, I can only assume that it will and therefore I’m starting to look for supportive candles in that general vicinity. On top of that, I recognize that the 1.90 level is roughly at the trend line as well, so there will be a certain amount of psychological support there also.
Watch the gold markets
Watch the gold markets as well, because quite frankly there are signs that gold may soften up a little bit. If that’s the case, it will more than likely work against the Aussie anyway, and with that it’s only a matter of time before most currencies continue to gain against it. I don’t really think that the Aussie is going to suddenly strengthen, but do recognize that a break below the trend line of course would be very bearish. If we get that, I would anticipate seeing the market head to the previous low, which would be somewhere near the 1.88 handle. At that point in time, I would anticipate a bounce and a test of the previous uptrend to see if the trend line certainly offers resistance, which of course is a normal phenomenon.
Ultimately though, I do believe that the support will probably hold and that we will continue to go higher. I think that we are heading back towards the 2.00000 level, but that of course is a very long-term call.
