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Why it could be the perfect time to buy the Australian dollar

by , 22 September 2015

Over the past year, the Australian dollar shed 25% against the US dollar.

But just lately, the Australian dollar has started to recover some of those losses. It's started an uptrend against the greenback.

So if it worth buying?

Let's take a closer look…

The case for buying the Australian dollar

The ideal set up for a long trading opportunity is:

  • The asset it cheap;
  • It’s hated; and
  • It’s starting an uptrend.

The Australian dollar meets these criteria, Steve Sjuggerud in Daily Wealth explains…

It’s cheap
From last July, the Australian dollar is down 25%, so it’s cheap.

It’s hated
As the Commitment of Traders (COT) reports show, the currency is well out of favour.

The COT sitting at a low levels shows that futures traders expect the Australian dollar to continue to weaken. You can see this in the chart below…

Australian dollar COT

When levels are this low, it shows how much traders hate the currency. And when sentiment is this low, it can turn a bear market into a bull market.

How to trade the Australian dollar

Starting an uptrend
The Australian dollar hit $0.69 on 4 September and is now trading at $0.71. This isn’t a strong uptrend as yet, but may be worth a trade with a tight stop loss, aiming for a take profit of $0.81.

If the Australian dollar recovered to this level, it would be back trading where it was in May.

To take advantage of the potential profits here you need to buy the Australian dollar against the US dollar.

So there you have it. Why it could be the perfect time to buy the Australian dollar.

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Why it could be the perfect time to buy the Australian dollar
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