The AUD/USD pair had a great showing on Friday in reaction to the stronger than expected Non-Farm Payroll report out of the United States. This had the market bullish in general, and the Aussie is one of the Forex community’s favorite ways to play the “risk on” attitude of the markets. The market has been consolidating a lot over the last year and a half, and although we have seen a strong move on the session, at the end of the day we are still in that range.
The commodity dollars got bid up in general on Friday, with the copper market absolutely exploding. By the end of the day, High Grade Copper gained over 6.5%, which is almost unheard of. Many of you probably don’t know this, but the Aussie dollar can be greatly influenced by copper, as the Australians export so much of it to places like China.
The rising copper prices will certainly give a boost for Aussie demand, but whether or not we can break out because of it might be another story altogether. The strength of the Friday candle and the fact that we did close at basically the highs does suggest that there is more to come, but the 1.04 level has been stubborn over the last couple of weeks.
The “middle line.”
The 1.04 level has been the “middle line” in this pair for about 18 months now. This area is “fair value”, and as a result the pair doesn’t like slicing through it very much. This isn’t to suggest that the pair won’t breakout, but the area will certainly be something to look out for.
The downside features the 1.02 level, an area that has been increasingly supportive. This area has to hold for the bullish traders to remain at least equals with the Bears, but at the moment there seems to be little worry about that happening. The breaking of the 1.04 level will more than likely signal that the pair is ready to try and breakout to the 1.06 resistance area, or the “top” of the rectangle.
