A continuation of recent strength in Aussie Dollar / US Dollar (AUDUSD), above major overhead resistance at its 0.9380 November 2009 benchmark high, would indicate that the Aussie's larger October 2008 major uptrend versus the US currency is resuming. Considering the tight and stable positive correlation between AUDUSD and commodity prices, and more specifically with economically-influential copper prices, continued strength in AUDUSD would indirectly suggest increasing economic demand and the likelihood of a similar rise in the Dow Jones Transportation Index.
In our September 7th Keys To This Week report we said:
"A new bullish shift in near term market momentum, plus the failed bearish chart pattern in the S&P 500, indicate that a near term bottom is in place in the broad market index at the late August lows and clears the way for at least a retest of the 1,129 August highs."
Since that report the S&P 500 has risen by 35 points or 3.2% to as high as 1,127 as of September 14th -- just below important overhead resistance from 1,129 to 1,131. A corresponding resistance level at 1140 is coincidentally being tested in the NASDAQ 100. This represents a near term decision point for the market where it must decide whether the April downtrend is still intact, or or if a retest of the April highs is on the horizon.
In today's report we attempt to answer that question by displaying and discussing what may be an emerging bullish breakout in the Australian Dollar (AUDUSD), and its potential directional implications for both commodity prices and, indirectly, the Dow Jones Transportation Index.
THE AUSTRALIAN DOLLAR'S RELATIONSHIP WITH COMMODITY PRICES
Before we focus on the directional implications of recent price activity in the Australian Dollar, let's first establish its relationship with commodity prices. The Australian Dollar/US Dollar has maintained a tight and stable positive correlation to the CRB Index over the past decade,
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