Australian dollar higher for sixth consecutive day, why it could go higher

That kind of winning streak is usually a cautionary sign but the total magnitude of the move has been a modest 133 pips — less than the one-day rally following the Fed’s un-taper. Not only has AUD/USD broken out technically but other Australian dollar crosses have done the same.

It was tough to find a bigger AUD bear than me at the start of the year but with the RBA moving into neutral gear, there is room for optimism. The latest move breaks the 38.2% retracement of the April-August decline and the 50% level at 0.9715 or the 200-day moving average would be modest targets.

In the near-term, I would preach caution. The stock market is losing momentum following the agreement on the fiscal impasse and that might present a chance to buy a dip.

AUDUSD technical analysis Oct 16

AUDUSD with 200dma

Author: Adam Button

Adam Button is the managing editor of ForexLive™. He was previously the chief currency strategist at XForex and has also worked with Intermarket Strategy. Adam believes there's an edge in knowing every tidbit of news. He was formerly the head of the markets team at the Canadian Economic Press and is a graduate of Ryerson University. Adam lives in Montreal, follow him on Twitter: @FX_Button.

12 Comments

  1. Looking to sell if we get in the 96’s. Still a very big bear (some say always have been but that’s nothing to do with AUD…).

  2. Good call Adam. Make a note, when AUDUSD takes out .97750 our call is this; AUDUSD as a pair has been a slow mover up to this point. It has taken a long 10 weeks to get from the recent bottom at .8843 to where we are today, and it will take a few more slow growth weeks to get to .97750. Our call is the trip from .97750 to $1.05 will only take 1 week. Write it down.

  3. That’s a heck of a call. I’ll make a note of it and if you’re even close that would be awfully impressive.

  4. Nicely put. Waiting on for an opportunity to open a new position. Todays move has broken a tight range which has been quite tradable.

  5. Adam, we have to “go big ” out here in Grand Cayman, it’s expensive to live here :)

  6. That’s some shout Scott. If that’s where you think things will go then all US$ crosses will be similar. Thinking about that we are upon the next debt ceiling debate and a total breakdown of the reliability of the USD. I am of similar thoughts regards breakdown but not like this on AUD!!!

  7. I’ve heard you can spend $100 on lunch there for a burger and fries.

  8. Scot,
    am curious as that is a big call.
    Is this technical or do you believe the Australian economy is ready to rise significantly on domestic consumption or China?
    Or some sort of Global boom to run up the resource sector again?
    Or some collapse in the USD?
    Anything is possible in this game.
    Thanks

  9. If my scenario works, Aussie won’t get past 0.96. It might stall at that number and fall again. I am taking gold as a indication of course. However I will be wrong if it break past 0.96 convincingly but only convincingly.

  10. @Adam, yes much like buying lunch at $100 US in NY. However, NY does not have 7 mile beach, one of the finest Ritz Carlton resorts in the chain and 1st world amenities. We also like English speaking people and contracts written in English. Yes, I know, were picky! Oh, and Grand Cayman is the 5th largest banking center in the world! I like banks :)

  11. @Richard, good and fair question. We have information about Australia that is very bullish and we also can foresee trouble for the USD in the near future. As you might imagine Richard, in order to get to $1.05 both a bullish Australian economy and a drop in USD sentiment will be required. We are foreseeing just that.
    In order to get to this bold call you will need prospective, let me put this in prospective. If you are a full time AUDUSD trader like we are, remember just recently back to April 2013, if I had made the call that AUDUSD would drop to $0.88 by August of 2013, I would have been severely questioned by this group, and rightly so. Here we are today at .9550 (from a bottom of .8848) and as we were just at $1.05 in April of this year, is it really such a stretch? In our mind, it is a given. As you can see, the present bearish view is not based on historical data but on recent memory (AUDUSD .8848) that has to be overcome in order to see the future. Also, you need to identify hard to find information about what is really going on in the Australian economy and political scene. Based on what we know, we invest accordingly. This is one of the hardest encumbrances to overcome in Fx, to shake-off negative recent history and look forward based on longer term data. If you can do so, you will prosper in Fx. We did just this recently on Cable at $1.50 and prospered quite well.

  12. Scott, your response is much appreciated and i would add by everyone who participates in this website.
    We live in unprecedented times and must keep open minds to events as they unfold.
    I make the attempt to not be married to any belief i might hold. I was of the opinion markets would continue to range trade as the forces between deflation and the implied inflation via CB interventions were balancing somewhat. But here you call for a powerful Trend and so it may well be.

    Today the Federal Government as much as acknowledged there will never again be even a curtailment of its operations. So the debate going forward will consist of how Big is Big, or until the whole thing comes down upon every ones ears.

    Thanks again

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