Whether you’re a currency trader, an importer, exporter, or just someone booking an overseas holiday, the movements of the Australian dollar (AUD) can mean that you stand to make hundreds or even thousands of dollars, if you keep your eye on where it’s headed.
We all saw the AUD trade to parity with the US dollar (USD) in 2011 and you may have watched in horror as it fell dramatically a couple of years later, as suddenly your purchasing power for imported goods and overseas travel went up in smoke.
Back then, the Reserve Bank Board called for it to fall to $0.80. You may have even agreed that the dollar was too high and needed to come back. But like most Australians, you probably weren’t expecting it to fall as far as it did.
At the time I shared my analysis, which indicated that our dollar may fall to between $0.70 and $0.74 in 2015. The dollar fell to $0.80 in January 2015 and continued to fall to around $0.68 by January 2016 before recovering. These were levels not seen since 2009.
Since then, the AUD has traded sideways below resistance at around $0.78 and has been relatively stable, however, this has changed with a strong rise this month to just below $0.80. My current analysis indicates that probability is high for the AUD to trade through $0.815 in the next couple of months, with the potential to achieve between $0.830 and $0.855, provided it remains above $0.78.
Remember, reading about what has already occurred won’t make you money, but learning how to read a price chart, which shows you what’s most likely to occur in future, will.
What do we expect in the market?
This week the Australian share market started the week on a low, closing at 5738 points on Tuesday, before it reversed direction to trade back above 5800 points on Thursday. This simply means that the market still hasn’t confirmed whether it will rise or fall over the coming months and therefore investors need to be patient while we wait for confirmation of a rise above 5830 points.
The reason the Australian market has been quite erratic recently is because it isn’t trading in a bear or boom phase, instead it’s in a transition period, where sentiment can quickly switch from negative to positive.
Dale Gillham Chief Analyst at Wealth Within