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March 14, 2021

Is the Australian Dollar a Buy?

Frank Cabibi

AUD- The Buck

Fundamental Analysis

From what is considered a mostly stable currency, the Buck has found its way into another likely uptrend this week. For the past year, the Aussie dollar has steadily raked in gains marking a significant uptrend seemingly boundless to the everyday investor. Calling tops are too hard to pinpoint, and following the trend seems to work out, until it doesn't. But, here are some things as to why I think AUD will be in more demand over other currencies.

COT Reports:

If we were to take a look at both COT reports on AUD as well as gold, we can find a pretty strong bullish case. If you want to check them out yourself, you can access fundamental analysis on out website, here's the link to the Aussie COT report.

By taking a look at the non-commercial interest in AUD, we can see a bias to the upside, meaning that big money, banks, hedge funds, etc. are more long term bullish on the Buck. Open interest in general saw a +426 increase on this past Friday, giving a green light to the bulls. Another COT report from gold shows an extraordinary change in futures. So far, gold is up 53% long on big money with 88% long trades overall, which has been steadily climbing for a while now. The reason I mention gold is because Australia's economy relies heavily on gold mining and is a top producing country of the precious metal. If the demand for gold goes up, it is likely that the demand for AUD will do the same.

Unemployment:

Reserve Bank of Australia's Governor Phillip Loew is to speak Sunday addressing economic outlook and possibly some insight on short term interest rates. Volatility is expected early on in the week, so that is something to look out for. Later in the week, unemployment numbers are expected to be slightly better than last month's, and for the past 5 months, they've beaten expectations. I think it would be fair to assume that numbers will beat again this time around, but it's always good to exercise caution.

Technical Analysis

In this segment, we're just going to take a look at a couple AUD pairs and technical setups I like.

AUD/USD 1D chart

AU on the daily chart had bounced off some key support on that rising trend line. Since price found support on that line two times already, it might still be something investors consider as a reliable level to go long. The only real resistance I see on the daily chart is at the .80000s mark which is just the recent high this pair hit a few weeks ago.

EUR/AUD 4H chart

EURAUD looks like it hit some support on the 4H chart, so price may climb to the upside. However, I like that falling trend line partnered with its 200 SMA as it looks like price has respected those zones since January. So, if price does come up to that level, it would look like a promising short setup.

AUD/JPY 4H chart

AJ candlesticks still haven't quite reached its peak from late February, although it got very near. I like that support line on this timeframe coupled with that rising trend line to solidify that support level. Also, if price were to break above that February high, we could possibly expect momentum to carry price higher above that resistance level.

Retail Sentiment

For the most part, retail sentiment is bearish on Aussie, regardless of the bullishness for AUD in most of its pairs. Retail might be against this currency, but it looks like playing the trend will still work. COT reports show big money moving in which is a more bullish sign than if retail were to buy.

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