AUD USD: Could we see a turning point in the market?

[donaldprice]

I thought I would be interesting to discuss the AUD: USD currency for a change as it is always nice to think about our commonwealth counterparts instead of the flat broke European neighbours, lol. As everyone knows no doubt, Australia cut its interest rates, like most countries around the globe and as a result has seen a one mighty fall in the market. However, this caught my eye that we are now approaching the 61% level on the daily chart and I am smelling a change in momentum. It also looks as if we have almost completed the 5? wave pattern on this chart, therefore be nice to here some ideas from IG's finest traders.

[Mercury]

HI , don't know about finest traders, still quite away off that but I'll give it a go.

 

I think you are on the right track but the picture is not yet clear to me and there could be several scenarios here.  If I take a step back and look at the weekly chart I do not think this pair has reached bottom yet so the AUD still has some way to go down vs the USD and this fits with analysis of other USD crosses.  So unless you think the DX will reverse and head down I can't see a scenario where AUDUSD has bottomed out yet.  My next question is whether we have seen a large scale EW3-4 retrace rally or are only half way there.  We had strong Pos Mom Div at the 18 Jan 2016 turn on the Weekly chart but Stochastic and RSI both hit overbought after than and price rebounded back down.  We talked about a Short at that point.  That recent high could be a wave 4 or may only be a wave A or a larger retrace however for my money the Stochastic and RSI still has to complete its round trip back down to oversold or near oversold so I think the current move down still as some way to go but how much more?

 

Looking at the Daily and 4 hourly charts you can make a case of an A-B-C or a 1-5 to wave A.  I can't yet make sense of the hourly chart do looking at the recent move down on the 4 hourly I could see a 1-5 but currently prefer the 1-3 count as depicted, which suggests another leg down in wave 3 still to come with likely termination at 62% Fib (Daily support line and lower daily tramline).  After that a strong leg up but still a retrace before a final wave down to complete this move.

 

The alternative is your suggestion that this is a 1-5 (still could complete at the Fib 62% under that scenario) and then an A-B-C retrace before a continuation down to find the bottom of the market, maybe around the 6800 area?

 

I have taken partial profits on Shorts from the 21 Apr high and will probably let the remainder run and seek additional shorts after any major retrace.

 

Thoughts?

 



[donaldprice]

Hy Mercury, the impression I got from looking at the charts, is that further weakness in the currency is still possible. I believe that previous recent long rally was no more than a retracement of W3 on the weekly chart. However what caught my eye was when we where approaching the 61% of the weekly retracement, just ironic the RBA minutes where released which confirmed the so far temporary retracement. However, it cannot be dismissed that further bearish sentiment could still be on the cards.

[Mercury]

Agreed  I believe that is what we will see if USD strengthens and mining commodities continue to weaken, maybe Oil too, then AUD should also weaken and now the RBA has dropped interest rates, which must signal more from them in due course, there surely must be both fundamentals and technicals pressure on AUD to drop further.  My assessment is that this cross has not yet reached bottom so a fairly decent run down is on the cards.  I may look to top up my shorts on conclusion of this rally BUT that would be a short term trade as I expect a stronger rally off the Fib 62% (and my lower tramline) the conclusion of which ought to provide a much better opportunity for a short.  The reason I might consider short on this rally and then move to B/E is in case this turns out to be that stronger rally, you never know.

[donaldprice]

Agreed, after that sudden announcement from Australia's , it does appear that if they are this quick to act, and if further pressures come on their exports and china of course, it would justify our analysis even more. With the American dollar however, and recent weakness in US data, Janet Yellen, will be sitting now on the edge of her chair with next major economic announcements. Really find it difficult to comprehend as to why she raised in the 1st place, when every other country is doing the opposite.

[Mercury]

She was trying to maintain the purchasing power of the USD, was the assessment at last nights debate (I guess that is about the US people feeling rich...  A lot of the policy right now seems to be about tricking consumers into feeling wealthy and confident enough to spend and thereby stimulate demand but people have been reducing their debt not taking out more...).  The trick is what will she do next?  I suspect the stock bulls are expecting dovish signs off the back of mixed data, though retail data in the US was alright, but specifically what I'm not sure.  Perhaps a reversal of policy?  Can't see that happening just yet.  At best she will kick the can down the road and that may not be enough for the doves.  Such a scenario would see USD retaining strength (I think it is a reversal of policy that would knock USD rather than an absence of further rate increases given where all the others are at) and stocks declining further, maybe even tipping over?  If Oil drops and industrial ores continue to decline then the cat could be among the pigeons.

 

[donaldprice]

No doubt, she would be made a laughing stock if she decided to cut interest rates and be seen as irresponsible. Her justification of course will be that they did not foresee slow growth, which begs to wonder how there forecast models work, as they new their was economic instability from emerging markets of which could potentially affect them.

[Mercury]

True but I remain skeptical of central bank analysis and Treasury departments for that matter, too political and therefore prone to confirmation bias.  It is also an election year in the US after all...

[Caseynotes]

Report of a large option expiry capping audusd  from ForexLive ...

 



[Mercury]

One for you   Again going back to the beginning.

 

The Monthly chart clearly shows the commodity driven rally of the AUD vs USD right up to the commodity price peak in 2011.  Since then it has been down hill all the way.  Bearish move looks like a 1-5 motive wave to me so far and we have either completed the Wave 3-4 or are only at the Wave B of an A-B-C but either way the long term trend seems to be down.  Decent pair of tramline on the weekly but I am disappointed that the price didn't reach the upper tramline, hence the alternative scenario for a further wave C up to complete the Wave 3-4 retrace.

 

Looking at the Daily we could have seen the Wave B completed and already have turned into the Wave C that would take the market up to the tramline but alternatively Wave 4 could be done.  The 4 hourly and hourly charts are showing bearish signs but this could easily reverse.  The next few days and weeks should tell us which scenario we are in.  My bias is for further falls after a brief rally.

 

 

 



[donaldprice]

Hy Mercury, hope all is well and always glad to hear your analysis, it does appear to me that we have not seen the end of the weakening currency pair . Their are many key levels in the medium term to cover and therefore I am inclined to agree with your analysis that W5 is now in process therefore any rallies you be looked at shorting opportunities, especially in an environment where a weaker currency seems to be favoured by most.

[Mercury]

Aussie turning at Wave C (50% Fib)?

 



[Mercury]

Aussie showing a similar picture to Cable with a hit on the 50% Fib, again a Short seems like a play with a close stop just above the resistance zone?

 



[Mercury]

Similar scenario as EURUSD exists on AUDUSD also

 



[Mercury]

Is the Aussie set for another bearish move?  I have been a bit bullish on this one, although I did take a chance of a Short at the last turn down.  Given what is happening on Copper I am wondering if mining is set for another hit and if it is then this cross will tumble.

 

Techncials look decent for a Short about now.  If it break through resistance and makes a new higher high then a significant rally is possible.  There is a lot of resistance to get thorough thought...

 



 

 

[Mercury]

Is the Aussie nearing a turning point?  Iron Ore and Copper have been enjoying a strong rally of late, which boosts the AUD but can that last?  This pair could be heading up to a higher retrace, there are 2 scenarios in the big picture, but just now the scenario where a Wave 4 retrace is completed and a 1-2 retrace of a move down is in focus and we are at a significant resistance turning point in that a break up through this almost certainly means fresh highs but a turn down means a strong likelihood of a decent drop.

 

On the Daily chart you can see the wave pattern with the Wave 4 (purple) retrace end and the current wave 1-2 to current price.  This is now at a 76.4% Fib from the Wave 4 (purple) high with Neg Mom Div and Stochastic/RSI over bought.  The rally profile is in A-B-C (unless it is about to make a retrace and then push on up to the 8400 area!).  On the Hourly chart you can see the A-B-C closer, with Wave C having completed a 1-4 and now in a consolidation Triangle formation.  Whether this is consolidation before a break out up or a reversal is not clear but there is strong Neg Mom Div.  I can't be sure we have yet seen the final high so another leg up is very possible and I'd prefer to see Stochastic and RSI over bought and turning back, which it might well do on another leg up.  Either way a break of this Triangle formation is a trade-able event in my view and currently I am leading towards a bear move.

 

This is also consistent with my views on GBPUSD and GBPAUD, where I expect rallies today to complete their retrace up.

 



[Mercury]

Lower Triangle line now broken and quite swiftly.  Turn at potential W2 (pink label) was at 76.4% and a kiss back on up-sloping retrace tramline set.  If we now see a strong 1-5 down followed by a small A-B-C (possible to the Fib 38% of the current move) then that would confirm the Bearish outlook.  Shorts are the order of the day it seems.

 

 

[Guest valu]

Can you guys see the charts from that big amount of drawings?

[Guest ALF]

Don't see update here... My Aussie Mates are waiting too Long already.... D'day