Comment: Price action since mid-April can be seen as a very large ‘flag’, understandable consolidation under what had been our first measured target at 0.8200. Note that one standard deviation from the mean since 1984 lies at 0.8155, making this a pivotal area. Retracement support and a large Ichimoku ‘cloud’ have nudged the Aussie higher, resulting in a daily close above the top of the pattern. Exciting for some, maybe, but what is really needed to confirm the next leg of what should be generalised US dollar weakness is a weekly close clearly above 0.8200. This should push momentum decisively into the bullish camp setting off a sharp squeeze to 0.8400 and then towards our medium term target which remains at 0.8800/0.8900. A break above 0.9000 on a first attempt is unlikely. The huge gyrations of the last twelve months suggest volatility should remain relatively high until at least year-end.
A weekly close below 0.7800 would force us to adjust and review.
