The AUD/USD pair shot straight up on Friday as the “risk on” attitude came back into the markets. The pair is often used as a proxy for risk appetite and the gold markets, both of which rose during the session.
The recent bounce has come from the 50% Fibonacci retracement level, and as a result suggests that the bigger players are now involved to the upside again. The pair is overall bullish during the past several years, but is often subject to serious corrections. The Aussie of course will continue to be heavily influenced by gold and copper both, of which Australia exports plenty.
The 200 day exponential moving average is now below the closing price for Friday, and this is one of the two conditions we needed to see in order to be comfortable to buy the Aussie again. The other was of course if a closed above the 1.0450 level, which it has just barely done. However, simply looking at this candle suggests that the move higher is the most likely in the near term, and as a fact we are willing to go long on a break of the Friday highs now.
The pair will now be considered a “buy on the dips” one again, although one will have to keep an eye on expectations out of Australia, as the Reserve Bank of Australia is expected to cut rates soon. This could be harmful to the health of this pair in the future, but the short term is certainly suggesting that the upside will be visited. The selling of this pair isn’t a thought at these levels now, as there are far too many potential support levels below current prices.
The shorter time frames can be used in order to find supportive candles. We are especially fond of 4 hour and even hourly charts for entries, but defer to the higher time frames in order to make the boundaries of our trades known. The pair looks as if the bounce has more to go, and we are going to buy it as a result.