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AUD/USD rose during the session on Monday, albeit in a fairly weak fashion. The market is approaching the uptrend line from the ascending channel, and as such we think the support will start to step back into the market here. Although we finished the Monday session with a bit of a shooting star, we are ready to start selling because of this support line.
We should also note that the 1.03 level is looking very supportive, and therefore we think that even a break down below the channel and could only end up being a false breakout. With this in mind, it is very difficult to sell the Australian dollar, not to mention all of the fundamental reasons that could propel this market much higher.
The gold market is typically you what this pair will follow, and as such it looks like the gold market is about to break out to the upside. If this does in fact happen, the Australian dollar should follow. Also, there is a lot of talk about central banks easing again and this would of course be good for precious metals and other hard commodities. Any time precious metals get a bid, the Australian dollar tends to do well.
Also, you have to keep in mind that this is a low yield world we live in now. Because of this, many traders are willing to buy higher yielding currencies in order to get some type of return. With this in mind, we think the Australian dollar is one of the most attractive currencies overall. This is especially true because of the higher than usual or even normal rates for a major currency right now.
If the Federal Reserve does in fact continue the monetary easing policy, it is very likely that the Australian dollar will rise in value. In fact, we think that a lot of traders are trying to front run that decision. If we get however manage to break below the 1.03 level, we would be more than willing to sell this pair as it would show a massive shift in momentum to the downside. On a break of the top of Monday's shooting star however, we would decidedly the long.