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The AUD/USD pair fell during the session originally, but bounced in order to break back above the 1.05 handle. The hammer from the Wednesday session suggested that we found support at the 1.0450 level, and as such we suspect that this market was going to rise. It did in fact, and closing about 15 pips above the handle suggest that we are ready to attack the 1.06 level.
If we can get above the 1.06 level, we think that this will open the gateway to the 1.08 level, and then of course the 1.10 level. The Federal Reserve and other central banks around the world are looking to ease monetary policy in the near future it seems, and as such this should provide a lift to the gold and commodities markets in general.
As the gold markets take off, the Australian dollar should as well. Because of this, we think that the longer-term trend is certainly up for this market, and the fact that the ascending channel has held sold well over the last several months lends credence to this thought process.
We are more than willing to buy this pair on a break of the Thursday highs, knowing that the 1.06 level will probably give the market a little bit of trouble. However, it should give smashed through sooner or later, and we are more than willing to hang on and wait until that happens. As for selling the Australian dollar, it is a very difficult proposition indeed and would take a series of moves and headlines in order to have us doing so.
The first thing that would lead us to sell this market would be if we break the bottom of the ascending channel. The 1.03 level is important to us as well, and the daily close below that would have a selling also. And lastly, if the Federal Reserve for some reason does absolutely no easing over the next couple of weeks we think that this pair would absolutely crumble. The market seems so dead set on more Federal Reserve easing that it's almost as if the Federal Reserve is painted into a corner. If they do disappoint, we expect all risk assets - the Australian dollar included - to get beat up.