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With all the focus on European debt and a possible default by the Greek government, we haven’t heard too much lately about the Australian Dollar, which has been slowly but surely creeping back up towards a retest of the All-Time-High $US1.10 level, as shown in Chart 1 below: Chart 1
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A month ago I stated in an article in Trading Tactics that I did not believe $1.08 was a place to be buying the Australian Dollar and nothing has happened since to change my mind.
The current high for 2012 is the weekly swing top on 29 February of 1.0856. Those who attended my one-day forecasting seminar on the Australian Dollar in September last year may recall that 28 and 29 February showed up as the key area to watch, based on the repeating time frames spreadsheet I discussed on the day. The 29 February high gave us a small Double Top, as illustrated in Chart 2 below: Chart 2
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So, will we see a minor pullback before the Australian Dollar rallies up to test (and possibly take out) the All-Time-High, or will this be the high for the year?
For me, the big test is the $1.03 level. If the Australian Dollar has more upside potential, then it shouldn’t fall much below this level. Why $1.03? Well for starters, it is the level of two previous tops, as shown in Chart 3 below: Chart 3
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Further, a 200% projection from the Double Tops lands nicely within this area, as does a repeat of the pullback we saw in December and it is also around a 50% milestone from the October major bullish range, as shown in Chart 4 below: Chart 4
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If the October range is going to repeat (which would see the Australian Dollar up around $1.10), then the 50% milestone (which proved to be resistance on the way up) should act as support. If this level is broken I would suggest we probably have a yearly top in place.
If, on the other hand, the Australian Dollar finds support around the $1.03 level, then a retest of the All-Time-High of $1.10 is the next likely move.
For travelers or business owners who deal in foreign currency, the resulting move could be very important. As a trader, I’m not so much interested in whether this currency goes up or down – my job is to follow the trend and look for potential moves from which I can profit.
Be Prepared!
Mathew Barnes
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