Today’s Forex educational article is focusing on the Australian Dollar versus the U.S. Dollar. Thank you for taking the time to visit and read this article, it is much appreciated! Just as any sharing of the FX article training is always greatly valued!!
The article will be taking a bird’s eye view! We are going to analyze the expected moves in the upcoming year op to the summer of 2014! Yes you read it correctly, next year summer 🙂
Any analysis that far ahead of time is, of course logically speaking highly exposed to unknown future events which can alter the outlook. But from a grand perspective I do think that there is a decent probability the currency pair could move as shown in the analysis below. Using technical analysis as my tools, I will show you what I believe to be the path of least resistance and therefore my Forex advice is as follows.
To get that bird’s eye view we must use the month chart.
On this time frame it is obvious that the Aussie is in a huge up trend:
– It has made 3 waves up so far;
– The 1st and 3rd waves were impulsive and grand moves up;
– Wave 2 was deep and retraced back to the 786 retracement Fib;
– Currency is now potentially in a 4th wave.
The Oscillator gives some more interesting clues.
- The wave 3 AO had a higher level as the wave 1 AO, which is confirming the count -> convergence;
- The wave 2 AO was lower than the bottom, which means hidden bullish divergence.
Both readings confirm the classical wave count setup.
From the analysis above we are able to derive and conclude that the AUDUSD could be in a huge wave 4 correction.
Elliott Wavers know that wave 4’s are usually big and drawn out. These waves love to consolidate in a tight range for a very long time.
The assumption of the future predictions is based on this analysis that the currency is currently in a wave 4.
With that in mind we can expect the following for the current wave 4:
1) The AO will return to the zero line. That is the minimum requirement needed before we are able to conclude that wave 4 has potentially finished and the Aussie would be ready for the 5th wave. (read here about the AO and divergence)
2) Wave 4’s like to retrace back to a 382 Fibonacci level. That is the most common retracement Fib for such a wave. A 236 and 500 Fib are also possible. The 382 Fib is at +/-0.9130.
The weekly chart is showing the possibility of the currency making that down move back to 0.9130. Why?
The currency has all the classical behavior and characteristics of an ABC correction:
1) After topping out at 1.1060 the FX pair made an impulsive move down back towards 0.94. This is most likely an A wave of a bigger ABC correction to the downside;
2) The entire B wave is either an ABC or could become a contracting wedge with an internal ABCDE;
3) The C wave should bring the currency down to the monthly 382 Fibonacci retracement Fib.
Other things to consider:
a) Wave A would equal wave C:
- The length of the A wave is 1,700 pips;
- The top of the B wave is 1.0850. Subtract 1,700 from 1.0850 and that is 0.9150.
- THUS, wave C is equal to Wave A at the 0.9150 mark, only 20 pips away from the 382 Fib!
b) If we place a Fib on the A wave of wave B, the Aussie was not able to break the 786 five (!) times in a row.
c) There is a -272 target at 0.9230, which gives great confluence with the 382 Fib.
d) We are making weekly twins. If those indeed print at the end of this week and close to something similar as is shown now, then we can expect an impulsive 5 wave down.
e) There will of course be support areas along the way that will give bounces to the upside, but I do expect downside continuation till the 382 gets hit.
Time frame elements + future targets:
1) The down move should be quick. The C wave of the C wave usually is impulsive and therefore should be completed relatively fast. Especially in comparison to the long and drawn out corrective move of the B wave of the B wave.
2) What I mean with quick on this time frame is the same number of weeks it took for the A wave to complete, which was 10 weeks.
3) So from mid April till mid/end of June the Aussie should be going down.
4) After that there should be a wave 1 of the wave 5. This will most likely take another 2-3 months and will be slow and tedious as it is going to take place during the summer months (July, August, September).
5) The wave 2 of wave 5 will be a downside correction which will take longer than wave 1. My guesstimate is 4 months, which brings us to end January 2014.
6) The wave 3 of wave 5 will be impulsive and quick and will take us at minimum to the 1.10 area for double top. This huge uptrend will start in +/- February / March 2014 and will last a couple of months.
7) The length of wave 4 of wave 5 and the wave 5 of wave 5 are difficult to predict as we approaching summer of 2014 in our summary.
8) Depending on the strength of the trend the currency and the entire wave 5 structure has the potential to go and hit the targets at the 1.24 – 1.27 area.
Hope you enjoyed the free Forex analysis!
It would be great if you left a note down below!
Do you think the trade setup is crazy? Or does it make sense to you? Whatever you think, I would love to know!
Thanks and Good Trading!
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