The Australian dollar has hit a two year high as it surged on the back of the Reserve Bank of Australia meeting minutes. The minutes showed that there was renewed confidence in the Australian economy and there was strength returning to the labour market. Additionally, the neutral cash rate was estimated at 3.5%, which in turn means the RBA will likely look to be more active on the monetary policy front. If we continue to see strong progress for the Australian economy it’s likely we could see further talk about the possibility of a rate rise and the potential for one to actually appear in 2018. A number of things will hinge on this, and growth in China and the commodity sector will likely be one of the key global trends the RBA keeps an eye on.

For traders there will be some key focuses around Fibonacci levels and of course current psychological levels that appear when dealing with commodity currencies. For me the 80 cent mark is likely to be a strong point that acts as resistance for traders, as time and time again traders look to treat it as resistance and support. Additionally, after breaking through the 38.2 fib level, it’s likely that traders will also focus on the 50.0 fib level which seems like a natural long term target for traders in the market. I would expect that in the event of a pullback we would likely see support at 38.2 or alternatively at 0.7761 which will act as a key level if the bears are return anytime soon.
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Gold continues to be a weird one at present as investors are a little weary of the USD. The failure of the republican party today with the health bill has seen caution amongst market commentators on the basis that the US government seems unable to pass anything at present. This kind of fatigue regarding politics looks likely to continue unless there are a few more wins. However, gold has been a big benefactor for these movements as traders look to hedge their positions. It quickly goes to show that even with hawkish central bank talk the markets can continue to find an excuse to buy up gold on the back of political risk.

On the charts it’s clear that gold’s breakout is not a one off and that we are likely to see further strong movements after pushing above the 20 day moving average.  The level above at 1258 is likely to be a strong target for gold traders, above this 1295 continues to be the strong level that will be hard to cross. If we do see a pullback I would be surprised to see it push through the 20 day moving average as the bulls are looking very strong at present. However, in the event it did happen I would anticipate 1207 and 1179 acting as key levels.

By Alex Gurr, FXTM Guest Analyst

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