From the desk of Tom Bruni @BruniCharting
Thanks to everyone who participated in this week’s Mystery Chart.
Most were waiting for more information given prices were at a clear inflection point, so let’s get into what it was and what our interpretation is.
The chart itself was the Australian Dollar/US Dollar pair, which is approaching multi-year support/resistance near 0.707 which has been intact for the last 5 years. As a currency highly correlated with Copper and other risk assets, we want to be watching this level closely. How it resolves will have big intermarket implications, but more importantly, will provide more information about the US Dollar Index’s next move.
Click on the chart to enlarge view.
This is also happening as Euro/US Dollar is breaking out above resistance near 1.1450, which represents 60% of the US Dollar Index.
And here’s the US Dollar Index sitting on a critical level of support at 96.
The US Dollar topping is a major theme that we’re taking advantage of in the second half of the year and it ties well into other trades we’re seeing in Base Metals and Emerging Markets.
If our thesis is correct, we’ll see this AUD/USD breaking out above 0.707 (or better yet 0.71) and continuing to the upside. It hasn’t done it yet, so we’ll continue to see and what the market has in store for us.
I encourage you to give the entire Q3 Playbook a good read. I think you’ll enjoy it and pick up a few quality ideas and different perspectives.If you enjoyed this post and want access to our premium research, start your 30-day risk-free trial or sign up for our “Free Chart of the Week” to receive more free research like this.
Thanks for reading and please let us know if you have any questions!