AUD Analysis: The Aussie dollar forms a flag

ForexNewsNow | Published on November 9, 2010 at 10:07 am

intraday analysis - The Australian FlagNEW YORK (Forex News Now) – In European currency market trading, we have seen a large up move in the value of the Australian dollar. This should be no surprise as traders have also been bidding up the value of gold, which of course Australia exports in large quantities.

Since breaking the psychologically important parity level with the US dollar and worldwide currency market trading, the Aussie dollar has remained strong, holding above that level with relative ease.

As seen on the chart below, you can see that the initial push through the parity level has now formed a pole, and the subsequent pullback has formed a flag. With the strong up move in the value of the Australian dollar in this morning’s currency market trading, this suggests that there is a strong upward bias in this pair.

As long as the correlation with gold holds, there should be significant fundamental reason for this pair to go up in value as well. Since there are various concerns around the world involving fiat currencies, sovereign debt, and various other issues, it only makes sense that the price of gold will continue to rise from here. Because of that, the Australian dollar should continue to find a bid.

Looking at the flag formation below, if you measure the length of the pole, you should get something along the lines of 180 pips. If the price rises above the top of this flag, confirming a breakout, you should be able to see 180 pips gain from that point. This is classic technical analysis the traders around the world use. As such it tends to be a self fulfilling prophecy. The measured move should give us a final target of roughly 1.0325 or so. Of course, this will be a confirmed by signal until the top line of the flag is violated.




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