AUD/USD gapped down on the open of the week, and has since filled the area. The resulting candle is a shooting star-like candle for the Monday session. The market has been in a triangle for some time now, and we are getting fairly close the point where the market will have to make up its mind.
The gold markets are currently sitting just below massive resistance, and is often a predictor of the Aussie dollar. The markets look somewhat similar, and as a result we think that one will lead the other. However, you never can tell which one moves first, so it makes sense to watch both markets at the same time. For gold, we need to see a strong close on the daily chart above the $1,650 level, and in this market we would need to see a daily close above the 1.04 level.
With this in mind, it should be soon that we see the move play out. The triangle is an ascending one that has formed over the last month, and this type of pattern truly does tend to work out over time. The uptrend line of the triangle would be the “line in the sand” for the bulls, and if we close below that level – the bears would start selling this market off. If that happens, we could see a run to the 0.96 handle, which is the bottom of the aforementioned triangle.
We prefer to take the long side of this market as the pair has been so bullish over the last several years. The bullish move in this pair could continue for much longer than the bearish one, and we could see a nice long-term move if we get above this level. However, the downside has to be considered, and even embraced if we see the breakdown.
A break of the 1.04 level on a daily close measures out to 1.12 based upon the shape of the triangle, and we are willing to buy and hold if that happens. As for the breakdown of the uptrend line – that is good for about 3-4 handles, not a bad trade.