The Australian dollar gapped lower at the open on Monday, but then fill that gap as one would expect.

After that, we pulled back but then found an explosive moved to the upside as the market now looks to be ready to challenge the 0.75 handle. That of course is a large, round, psychologically significant number, so breaking above there does of course means something.

If we can get a sustainable rally, I believe the market can continue to go to the upside. Pay attention to the gold markets, because they of course have a massive effect on the Australian dollar as well. If the Australian dollar continues to break to the upside, we could see a moved to the 0.76 level rather quickly.

Buying dips?

If we can break out to the upside, I believe that buying dips will be the best way to take advantage of the strength that we have seen. I believe that the market will then go to not only the 0.76 handle, but longer-term should start aiming towards much loftier goals such as the 0.80 level above. Having said that, the Australian dollar has been extraordinarily volatile as of late, and of course we have an interest rate decision coming out of Australia today.

It probably won’t so much be the decision, but the statement that will cause this market to react. If the Australian interest rate decision statement suggests that there is some hawkishness in the Australian central bank, that of course will be very bullish and should send this market much higher. Alternately, if they sound very dovish, we could get a negative move, but I expect the 0.74 level underneath a hold as support as it has been such a reliable area a couple of times in the past.

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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