Is the Aussie dollar signaling that a major commodity low is being established this month? It's possible.
The AUD and commodities have been highly correlated for a couple of decades, during which time, the Aussie has spent most of the past couple of decades inside of rising channel (1). It hit the top of this channel in 2011 as a long-term decline got underway. As the AUD has declined over the past 8 years, commodities – including gold and silver – have also declined.
The 8-year fall has the Aussie testing long-term support and the 2016 lows this month where a large bullish reversal pattern looks to be taking place.
One month’s price action DOES NOT prove that a low/trend change has taken place. This large bullish reversal pattern at 2016 lows and long-term rising support could become a long-term double bottom.
If this is a double bottom and the Aussie dollar rallies off this support, hard-hit commodities, especially gold and silver, could experience a strong intermediate counter-trend rally.
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