The AUD/USD pair initially fell during the session on Tuesday, but found enough support below the shoot straight up towards the 0.95 handle. The fact that we broke above the 0.9450 level is in itself a positive sign, but the fact is that the 0.95 level is the top of that resistance area. With that, we haven’t broken out yet, but it appears that the market is getting ready to do that.
A daily close above the 0.95 level suggests to me that the market is going to continue to go much higher, probably heading towards the parity level. Don’t be surprised though that if the next couple of days are fairly quiet, as the nonfarm payroll number will certainly have a great influence on the Forex markets as per usual.
Gold markets look a bit healthy as well.
The gold markets look fairly healthy as well, as we are sitting just below the $1330 level. That is the site of the next potential break out to the upside, just as we are sitting just below significant resistance in this pair. Because of that, I feel that this market may go back to the previous correlation that we typically see with the gold markets. If gold breaks out to the upside, the Australian dollar should do well also. This of course were simple directions, so the gold markets find themselves breaking down, the Australian dollar will suffer.
Nonetheless, it does appear that both are ready to go much higher. I think that perhaps the Australian dollar has been oversold over the last year or two, and as a result we should see this market go back to the parity level at the very least, and probably closer to the 1.10 level. This will be especially true if the markets take on a “risk on” attitude again, as the Australian dollar is without a doubt a “risky” asset. When I say risky, I mean that a lot of risky assets are tied to it as it is in fact a commodity currency as most of you know. The next couple of days should be rather important.