Australian Dollar Ready to Rally?

Australian Dollar Ready to Rally?

Since last September, we have seen some significant moves in the Australian Dollar as major selling pressures have entered into the market.  On the face of it, some might feel as though this is a negative for the Australian economy.  But the fact of the matter is that a weaker currency can actually have many positives that can contribute to the underlying economy.  This is because a weaker currency makes it cheaper for foreign consumers to buy products from Australian companies.

So the central trends in the Australian Dollar have been relatively clear, especially against its US counterpart.  This market activity had created some significant moves in assets like the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), for those of us that are familiar with currency market ETFs.  But for investors that are interested in more direct forms of currency investment, there are other markets that can be accessed through the world of forex.  Specifically, this would involve taking an assessment of the AUD/USD, which directly pairs the value of the Australian Dollar with that of the US Dollar.  Here, we will take a look at some of the major price levels that are currently being watched by forex traders accessing these markets.

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AUD/USD – Australian Dollar vs. US Dollar

Critical Resistance:   0.8150

Critical Support:   0.76

Trading Stance:  Sideways

(Chart Source:  Forex Broker CornerTrader)

AUD/USD Forex Strategy:  Momentum is clearly negative but there might be some indication that prices will start to turn in the coming weeks.  Watch for renewed activity at the 0.76 support level and the 0.8150 resistance levels.

The long term downtrend in the AUD/USD continues in full force, but we are starting to see some indication of a potential reversal in the coming months.  The MACD reading on the daily charts has moved into positive territory and risk to reward ratios clearly favor buy positions in the AUD at this stage.  That being said, there is still significant momentum to the downside to it is important to keep stop losses tight in order to protect against any unexpected losses in these types of trades.  In any case, it is unlikely at this stage that things can fall much further in the AUD so there is scope for gains in the currency as we head into the second half of the year.