Copper prices have rallied since midway through January from $1.93 to $2.29. If you look closely at the daily chart of copper there has been a pattern once confirmed has a 93% success rate. This pattern is the inverted head and shoulders and it has played out on the copper chart. We saw the neckline broken at the 38.2% Fibonacci Retracement level. The potential price target for copper is around the 76.4% Fibonacci Retracement level. at $2.36 it's not there yet but we'll certainly see a strong Aussie dollar if it does push up to that region.
Be mindful of the 200-day SMA (Simple Moving Average) which is currently below the 76.4% Fib Retracement level. If copper breaks through these key levels then we will most likely see the Aussie dollar continue to push up higher and test levels around 77c-78c region. In the short term with the weakness of the US Dollar this is likely to happen.
This week the only high impact news out of Australia is the Governor Glenn Stevens, it threatens to be a quiet week as this week is a shortened week. The markets this week will be on the guard for some renewed jawboning on the currency. Governor Guy Debelle stated last week; "Most central banks want lower currencies, to push up inflation or create a bit more activity… I don’t think we’re any different from that. But obviously everyone can’t have a depreciating currency." Based on this, Governor Glenn Stevens may not jawbone the currency to lower the Aussie dollar when he speaks tomorrow.
Oil prices have weakened after reaching $40 on the back of the first increase in US oil rigs. Crude oil may have further upside when the OPEC nations meet next month to discuss freezing oil production. If Iran comes to the party then we are likely to see higher oil prices which will support the Aussie dollar.
Weekly AUDUSD Chart May Have a Bearish Outlook
The weekly chart of the aussie dollar is showing a hangman candlestick pattern which may indicate a weaker aussie. This has not been confirmed, we need to take into account this weeks trading action and if we do get confirmation we may see the aussie dollar test support at 0.7370 in the short term.
Considering the weaker US Dollar we see more upside potential and with high impact news coming out of the US later this week; Final GDP, Core Durable Goods and Unemployment claims it will be interesting to see if the US Dollar can stop the recent slide.