10/01/10 Copper Breakout & Australian Dollar Correlation

Continuous Australian Dollar Futures 12/21/07-09/30/10:

The Australian dollar has rallied 61.5% since the lows in October of 2008. Following this move from .60 to .95, the Aussie tested its 2008 highs for 6 months (10/09-04/10), before it sold off sharply and shook out down to .80 in May of 2010. Since then, the Aussie is up 19.9% and has managed to break above this resistance level of .95. This leaves the market breaking out and in an area of resistance as it heads to test the highs in July of 2008 at .9770. The Reserve Bank of Australia has raised rates 150 basis points between October and May and expected to raise another 25 basis points next week. Australian banks are looking to raise their lending rates faster then the pace of it's central bank. As you will see below, the chart of copper and the Australian dollar are very similar.

Continuous High Grade Copper Futures 12/21/07-09/30/10:

Copper is breaking out the upside riding its Bollinger Bands and testing the highs from April 2010 at 3.68. China's September PMI was released today showing a rise to 53.8% from the 51.7% in August. The rise in PMI reaffirms China's slowdown is not that sluggish and their manufacturing is picking up. This adds a boast to copper as China is one of coppers biggest consumers. Technically, copper has been rising since it tested and held 2.80 back in May: http://twitpic.com/1pl6z8 and http://twitpic.com/1z5l4w. This move has been resilient as it has been able to push through resistance levels of 3.40-3.60 and head to the April highs. Taking out this high leaves the market in a bullish momentum with next major area of resistance between 3.80-4.00, and ultimately the highs of 4.27 from May 2008. In both the Aussie and copper, pullbacks to trend line should find support and be bought.

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Thank you and best of luck trading!

Stewart Solaka

futuresMONSTER

Twitter: @CHICAGOSTOCK

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