Could the AUD/USD resume going lower?

[donaldprice]

Has been very interesting following this currency pair. Appears to be a very clear correlation with oil and other commodities, which is sending this currency higher. However the australians want a weak currency to for their exports. Looking at this fundamentaly, it has not pushed through the 62% fibonnaci level, and is turning down. Could we see continuation of a bearish trend. MACD is turning red and STOCH now pointing lower. Be interesting to hear what other traders on here think of this.

 

 

 

 



 

[Mercury]

Hi Donald,

 

I trade this pair infrequently and usually only at major turns.  At present I am unsure whether we have seen a bottom and the beginning of a long rally or are in a long term Wave 3-4 (my preferred option at present).  If the latter is correct then we are nearing the end of the Wc.  The question in this scenario is whether we have had the W4 or Wc yet or not.  For now I am sitting it out and waiting for more data.  I am stalking this one for a major turn higher up to complete the long run down.  It is likely that this would coincide with a similar set up in mining so keep an eye on major miners and Dr Copper.  I don't think Oil is as much of a factor here a metals.  Oil is a big factor for USDCAD though!

 

Here is my chart:



[Mercury]

I don't trade this one often, keep it to the major turns as with commodities and other lesser FX like USDCAD.  This one is interesting though as there is often correlation with non oil commodities (mining basically).

 

On FTSE miners there is a case for bottom reached but also for another leg down and so it is with AUDUSD in my view and I suspect it is the latter.  There is always a chace that bottom has been reached and we must guard against that if taking the opposite view.

 

For now, either way, it looks to me like the AUD is coming to a turn.  At this point I cannot decide if it is a retrace turn or a major turn down but either way there are points on offer when it does and we can decide on which it may be later (hopefully after bagging some profitable trades!).

 

Here is what I am seeing, and it lines up with the rest of my USD analysis I think (let me know if you see it differently please!).  major trend down for a few years, big Pos Mom Div on weekly (could be showing bottom!) but now Stochastic and RSI potentially showing a reversal.  On the Daily, assuming W3 turn on the weekly and not bottom, we have either a 1-5 up to a Wa OR A-B-C (in red labels).  Strong Neg Mom Div and supporting Stochastic and RSI and a potential ending Triangle (see also Hourly chart).  For a Wc I'd prefer to see a touch near the Fib 50% so that is my preferred reading at present.  Also cannot rule out that any turn now is in fact a W1 of a strong rally up but let's look at that another time.

 

On the hourly then, using my preferred 1-5 to a Wa set up, I have a nice mini 1-5 coming to an end maybe near the pink Triangle top.  Not a major Fib but that is OK for a Wa, its the Wc you want at a Fib, though it is not far of the Fib 38 (daily) and could push up to near that for the Wa.  Again nice Neg Mom Div and supporting Stochastic and RSI (pattern here across all time frames, which is what I really want to see!).  Decent tramline channel running up to the Triangle Top line.

 

I'm looking for a W5 top out near the Tramline and Triangle line and then a break of the lower tramline channel to start the Wb down.  If I miss it there should be a small W1-2 turn that will be final confirmation and good entry point for a short.  Analysis of DX and other crosses should also help our confidence levels on this one.  If we catch it there is about 500 points potential here before we have to start wondering about scenarios again.

 

Charts:

 

[Mercury]

Aussie finally turning?  Or one more leg up?  If this one drops it adds to the USD strength potential seen on the DX.

 



[donaldprice]

 

AUD:USD has been on a bull trend for quite some time now, however if you look on the daily chart as well as the 2hourly you can see some divergence. Also approaching weekly pivot point resistance, therefore a rejection of this resistance could see this head lower. 

[Guest fibking]

it has topped without the shadow of a doubt.the interesting play is thru gold check out correlation.aussie was the last thing holding it up now gold is going to go into freefall. a close below 7415 on a daily level will send aud to below 72 handle.

[Guest Zero]

Interesting - will watch this and see.  Not questioning your call, but when ever I say publically "with out a shadow of doubt" I am always made to look silly.  Testing that theory now...  I hope you're right by the way.  I said 2months ago to someone offhandedly, not even thinking, the Aussie will probably hit 78 then have a rest.  I'm surprised it's up here. 

[Mercury]

Fibking,

 

I like the fact you aren't sitting on the fence but I have to agree with Zero, my experience with certainty is similar.  I don't believe anything in life, much less the markets, is certain (except death of course...).  I think we are dealing with likelihoods here, not even probabilities (at least for me because I don't do any statistical analysis myself).  At it's most basic it is a coin toss every time one places a trade.  Analysis helps us hone in on a particular set up to tip the likelihood in our favour but even so the odds seem to suggest that we will be wrong more than we are right, at least in timing.  I do favour analysing and waiting until you are as sure as you can be so hats of to you for that.

 

In terms of the set up on the Aussie, I can see where everyone is coming from and posted same previously.  I did enter a short at the last tramline touch (see below) but I am also seeing another leg up as a clear possibility.  On the Daily chart the Fib 38% has not yet been reached and this coincides with some good resistance.  Just above that is the weekly Fib 50% (drawn from the top of the whole move down to the low prior to that top, again at decent resistance.  If another leg up ensues I get stopped out but will look again at the pattern to see which of the Fibs I prefer the look of.  If it retraces and drops away then I'm in.

 

Overall I think we are looking at a major long term turn down to a final wave 5 to the bottom of this market as USD rallies.

 

Charts:



[Mercury]

Aussie made another leg up and turned just short of my tramline, short of the Fibs too.  Have a nice EW1-5 up to this latest turn.  Is this the turn?  Not sure but it is encouraging, especially when taken with everything else.  Still, need to see a nice 1-5 down followed by a new lower high on retrace to be more certain but looking good.  My previous trade's stop held so am still in and will move to BE (or just above recent highs) if this current move gives me half a chance.

 



[donaldprice]

Hy Mercury, although AUD USD has not moved much, look from the charts, it has failed to break the resistance line of 7829, and the MACD, RSI are still diverging, therefore i can see this move lower. 



[Mercury]

A strong move lower is confirmed now for me.  Looking at the Hourly there is a clear ending Triangle formation with that final leg up I was thinking might come. although it didn't make the slightly higher resistance level.  Still a break of the Triangle gave a great Short opportunity and it certainly dropped away.  Now I'm expecting a retrace before this bear move really gets underway.  I have a nice tramline pair and so I see two additional Short points.  1st the retrace turn, if you can spot it, but stops will need some room on that one.  2nd on the break of the lower tramline.  With DX showing the way I think I can be confident on taking wider stops to ensure I don't get shaken out.

 

But how far will this run?  Conventional chartist theory suggests at least the same distance at the gap between the tramlines, on a tramline break that is but let's look at the big picture.

 

On the Weekly I think the rally is only halfway there (i.e. a Wave A).  There is very strong Pos Mom Div and a turn at the 23% Fib, suggestive of a higher (at least 38% fib) to come.  Zooming into the Daily chart, we have a turn near the daily 38% Fib and just short of the 2nd tranline (red).  This also comes within a junction of 2 trams and a Fib line.  If it's a Wave B then it should travel, fairly fast to about about the Fib 50% at least, near that Weekly resistance line and then we will see what happens next.

 

Note that we have not had a decent Pos Mom Div on the Daily yet, hence I am still expecting a new lower low and so the market could move on down in this move to hit that (always an alternative scenario).  For now a sizable move down is a high probability so I'm just focusing on gaining Short entry points to hold for the ride.

 

 

[Mercury]

So  was proved right, the AUD had peaked but so was I , there was another leg up to complete the ending Triangle before the drop began.  Just goes to show that different methods can produce the same results.  Timing is everything unless you leave very wide protective stops (or no stops) and there were at least 3 decent entry points on this one, a classic for me:

1. At the top of the Triangle after the requisit 5 touches - tricky thing to catch the actual top though
2. On the break of the lower line of the ending Triangle - a high probability trade in my view and so it proved
3. On the break and retrace of the lower tramline - alas no kiss back but a nice double top with Neg Mom Div.

There were 2 other potentials: at the tramline break with a wide stop above the Weekly Fib 23% (purple hashed line) and at the support/resistance level of the previous few days (circa 7720) to catch any strong move down - one of my favourites because you get into safe profit quickly, and that is what happened.

 

Congrats if you got in but now it is all about managing the trade.  When to take profits, how long to let it run for?

 

My view up to now, and it is still the same so far, is that this moove down is a wave B of a large A-B-C retrace, after which we will get a final wave 5 down to market bottom BUT it could be that Wave C was the recent top and we are in the final wave down.  So far we have had a nice EW1-2 and are in a W3, which could run a long way.  However if it is a Wave B it very often does not obey any simple wave pattern and can look a bit chaotic and can also be a short (in days terms) sharp drop.

 

On the Weekly chart I have laid out my current long term forecast, subject to revision depending on how this current move pans out.  On the Daily chart I have earmarked the Fib 50% (blue hash with resistance line just below) for a possible wave B terminus.  On the Hourly chart the market has recently punched through a parallel tramline set and I expect it to reach the lower tramline before a retrace, which may give an opportunity for another Short.

 

So I'll hold and maybe add until we approach the Fib 50% I'll look again and see if I can decide which big picture scenario we may have.  If in doubt I may take partial profits but that is all ahead of us, for now I am happy to hold all my shorts at B/E.

 

If anyone has any alternative big picture views I'd love too hear them.

 



 

[Mercury]

I guess not too many people are interested in this cross but if you want to get in on a decent run down then take a look at the chart below.  I think the retrace may come back to the tramline (plus or minus a bit).  There is a decent short term resistance line just above the Fib 62% (7695ish).  As always there is a chance the market has already turned at the 50% fib (a close below 7610 would show that).  As for me I'll add below 7610 or on a tramline hit with stops above the resistance line.

 

Anyone thinking differently?