The AUDUSD pair initially fell during the day on Tuesday, testing the 0.7150 level. The market found enough buyers there to turn things back around and form a bit of a hammer though, so it looks as if the market should continue to go higher at this point in time.

A break above the top of the hammer would of course be very bullish sign, and therefore we would not hesitate to start going higher. Even if we pullback from here, we think there is more than enough support below to keep the Australian dollar float in the meantime.

We also look at the 0.70 level as massively supportive, and essentially the “floor” of the market as we believe it’s only a matter of time before buyers reenter the market anytime we get close to that area. In fact, we believe that the 0.70 region should be essentially the bottom of the market longer-term at this point in time as we are starting to see the market go higher and higher. This can be seen by the higher lows, and of course the higher highs. In other words, we believe that we are trying to turn the trend back around in the AUD/USD pair now, which is obviously a difficult thing to do. It causes the market to need quite a bit of momentum, so therefore it could be a bit choppy in the meantime.

In fact, trend changes tend to be very messy affairs, so it tends to offer quite a bit of opportunity if you can notice the change in overall attitude as it is essentially a very subtle thing at first, and then picks up quite a bit of momentum. Ultimately, the Australian dollar should continue to show strength as even though the gold markets have fallen, they seem to be trying to turn things back around longer term as well. Ultimately, we continue to buy dips as long as we can stay above the most recent low, which is essentially the 0.7050 level, and therefore we use that as the bottom.

Editor’s Note: Equity investors/traders can use the Currency Shares Australian Dollar Trust (FXA, quote) ETF to take positions in the Aussie dollar without a FOREX account.  The ETF looks to track the price of the Aussie dollar (AUDUSD), minus ETF fee. The fund seeks to reflect the price of the Aussie dollar (AUDUSD) with the shares representing a cost-effective investment relative to investing in the FOREX market.

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