The Australian dollar is working on its first positive day in the last 11 sessions. We’ll need today’s close above 0.9736 for this to become a reality. Aussie bulls, and commodity bulls, should look to the long side as we’re far into oversold territory now. As seen below, we appear to be finding mild support… stochastics are starting to turn higher and last week could prove to be an interim low.
In the last two months, the currency “from down under” has lost 7% against the dollar putting June futures at eleven month lows. Since trading above par in November 2010, dips back under par have been relatively short-lived. On every occasion in the last three years futures haven’t stayed below par for more than four weeks. Past performance is not indicative of future results. But this will be the third week that Aussie futures are under par…stay tuned.
The Australian dollar is correlated to a number of commodity markets and can be particularly influenced by big moves in metals, energies and obviously the greenback. As I’m mildly friendly to Crude, and I think it’s possible the US dollar is close to an interim top, the Aussie should be on your radar. As of this post, gold is $50 off its lows and silver is $1.50 from its multi-year low, which it reached overnight. In my opinion, there’s now enough evidence to start nibbling at bullish trade from these levels.
I like the idea of buying July call options, which have 47 days until expiration. Or, get long September futures and sell out-of-the-money calls, in the same month, 1:1. Use the 38.2% Fibonacci level, which is just above par (1.0014), as your first profit objective.
As always, I’m here to discuss specifics and give guidance. Give me a call…
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