As you know, I have been watching this market for potential trend change. You can see on the chart that I had laid out the descending triangle that got broken to the downside, the trend line that got sliced through, and of course the 200 day exponential moving average that had also been broken to the downside. On top of that, we ended up forming a shooting star during the session on Wednesday right at the level you would anticipate the sellers to get aggressive. Because of this, I have to admit that I was quite ready to start selling again if we broke down below the bottom of that shooting star.
Having said that, we never did. We did up forming a hammer on Thursday, which of course gives us a small signal that perhaps the market was going to suddenly get volatile. What happened on Friday was a significant statement though. We broke above the trend line, the 2.10 level, and of course the top of the shooting star from the Wednesday session. In other words, the buyers got extraordinarily aggressive.
Buying Dips
I think that if we can break above the top of the previous ascending triangle, which by definition is essentially a downtrend line, this market is one that you can serve buying dips in. There are a lot of things going on at the same time, because the Australian dollar is so highly tied to the commodity markets. At this point in time, I think the world has made the decision that they are much more comfortable owning British pounds than they are commodity currencies. Granted, the Australian dollar isn’t being pulled apart like the Canadian dollar is at the moment, but certainly it’s not a good time to be touting the virtues of owning commodities. With that being the case, it makes sense that we continue to go higher and the pullback has of course been something significant to watch. However, I have to admit that this sudden bullishness is pretty extraordinary.
