Over the past two days readers of our daily update know that we have been taking profits from our dollar longs against the Swiss franc and Canadian dollar and rolling the profit into long AUD/USD at an average rate of 0.7665. Today's whipsaw and then reversal in the dollar was exactly what we expected to see so we confidently stepped up to buy more AUD/USD as we consider a move above 0.78 to be just a matter of time.
Readers may also recall that for the past two weeks we have said gold was nearing a key low around $410 to $400 and that we would look to buy our first shares of GLD after having warned to stay away from the initial offering three months ago. What we did not expect was that the technical setup would be so ideal.
In the chart below note how both GLD and AUD/USD have recorded a bullish weekly reversal and will also both perform our famous "weekly candlestick trick" next week by opening to the outside of the current trendline. New readers unfamiliar with our "trick" may read a previous market call here when we forecasted GBP/USD to rally from 1.80 to 1.95 back in October: http://www.fxmoneytrends.com/10.15.04.GBPUpdate.pdf
Its not every day that Mother Market lobs one across the plate for you to hit. And considering that we are big dollar bulls for 2005 and have said so for months, gold bugs should take heed that we are buying. Moreover, considering that the dollar index has pulled back from key trendline resistance at 85.25 and that February historically sees a 50% of January's gains we think that today offers an ideal opportunity to position long either GLD or AUD/USD. Risk is limited to below this week's lows. We look to take initial profits in GLD at $43 and leverage into AUD/USD as it rallies to our longstanding target above 0.82 in the coming weeks. After that we will reposition long USD.
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