The AUD/USD pair had a strong showing on Friday as the bullishness in the Australian dollar continues. One of the first things that I noticed when looking at this chart is the fact that the 1.06 level is so well-defined on the longer-term time frames. Because of this, I do believe that we are entering a very important phase for the future of this currency pair.
The second thing that I've noticed is that the Wednesday candle was such a well-defined shooting star underneath that level. Because of this, I believe that a break above 1.06 will signify a new leg of in this pair overall. After all, you would not only be breaking the 1.06 handle, but you would also be breaking the top of the shooting star which in and of itself is a fairly bullish sign.
Federal Reserve
The Federal Reserve has expanded its quantitative easing policy, as well as asset purchases. Because of this, it looks like the Federal Reserve will continue to devalue the US dollar overall and this of course supports commodity currencies against the US dollar going forward. Ironically, the gold markets have not followed suit, and as a result that could be part of what has kept a bit of a lid on the Australian dollar.
Based upon the consolidation that we've seen over the last several months though, I do think that the 400 pips in this range will be repeated as is often the case. That would have is aiming for as high as 1.10 if we get the breakout. I also think that the 1.08 level looks to be somewhat resistive as well, and could be used as a decent "first target."
If we do manage to break down from here, I see the 1.05 level is offering support, and then most definitely the 1.04 level. Because of this, I would prefer not to short this pair, and will more than likely just look for a lower price from which to buy the Australian dollar going forward instead of trying to short it.