When to buy the Australian dollar: A forex strategy article by Muffett Investments

The Australian dollar in our view is one of the best places to keep a portion of your liquid assets. There are many advantages which we will summarize very precisely. We have already covered the fundamental case for the Australian dollar many months ago. We had also outlined the best place to take long positions on the Australian dollar. Unfortunately the price never came to the zone that we wanted. However more recently, we are seeing some weakness in the Australian dollar and we are likely to be presented with another opportunity to enter again.

Fundamentally, Australia is blessed with abundant natural resources. Although the main export the Iron ore is under pressure, Australia is also blessed with Oil and gas, Gold and Lithium. They also have abundant rare earth materials. And they are a dominant agricultural player and in the future will play the role of food basket for Asia. Australia also has low debt. Debt to GDP is 35% and so they are less likely to enact financial repression. The most important advantage for the Australian dollar is its exposure to Asian growth story particularly China, India and the ASEAN countries because of its close proximity. The fundamental case for the Australian dollar is clear.

If you have a look at the monthly chart, the Australian dollar has broken structure and is bullish. Here we present the daily chart of the Australian dollar. The chart shows the price action of the Australian dollar over 2 quarters. We have marked the Q2 low and Q1 low. In our view, the Australian dollar is in a market maker sell model within a larger Market maker buy model.

Our expectation is atleast a liquidity rund below Q2 low but it would be much better if the price can go below the Q1 low. The blue line below the Q1 LOW is an algorithmically significant line and the one of the best places to take long positions in the Australian dollar. These positions are long term and because the Forex market offers significant leverage, small positions over a period of time can give excellent returns.

If we look at the DXY, it is sitting just below an algorithmically significant zone. We are expecting the price to target the zone in this quarter and this rise in DXY will cause the Australian dollar to likely take out its Q1 LOW. We will be watching price action after the Q2 LOW is taken out and see if price can rally from there comparing price action of the Australian dollar and the US dollar. We have seen divergences on the longer term time frame which reinforces our bias.

The chart compare the price action of DXY and AUDUSD on a monthly time frame. The Australian dollar trades inversely to the DXY. So if DXY rises, AUDUSD should fall. In 2020, we say a significant rise in DXY with it making long term high. That would mean that the AUDUSD should have made new multimonth low. But this did not happen. The Australian dollar made higher low and this suggests significant accumulation of the Australian dollar.

Again more recently in 2025 before the big fall in the DXY, we had divergence. Here the Australian dollar was manipulated lower . The DXY was making a lower high and in an inverse markekt, the Australian dollar should have made a higher low. But this did not happen. If you look closely equal lows were engineered and the price was manipulated to go below the equal lows and once this happen, the price has rallied significantly.

The Muffett view:

Unless the fundamental case of the Australian dollar changes significantly we are maintaining a bullish view. Our best entry point is after price takes out the Q1 low. This would give the lowest risk entry for the Australian dollar. So lets watch the price action and see if the market provides us with a long term opportunity.

Analysis done in good faith and not investment advice.