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Australian Dollar: 'Still Surging'-- Why, Again?

This is a story we've seen repeated in the forex markets again and again.

Picture this. It's late May. You're in Australia. You have an interest in the currency markets: Maybe you speculate in forex; maybe your business depends on the exchange rates.

Every morning, you scan the headlines. This is what you see regarding the Australian dollar during the last week of May:

  • "Aussie dollar sinks to eight-month low"
  • "Little long-term support for Australian dollar"
  • "Poor data slams Aussie dollar"
  • "Aussie dollar drops as investors seek safe-havens"
  • "Australian Dollar Down After Retail Sales Slip"
  • "Weak China PMI Sinks Euro, Australian Dollar"

Even after a strong rebound the AUD saw on May 28 and 29, you read that "analysts don't see [the] improvement lasting too long unless the global economic backdrop improves." You sit down to make some decisions in preparation for an even weaker Aussie, and...

...and now, six weeks later, the AUD is orbiting the moon. Yes, between June 1 and today, against the U.S. dollar the Aussie dollar shot up from near $0.96 to over $1.04, despite all the "bad fundamentals" from late May.

This is a story we've seen repeated in the forex markets again and again: Right when everyone accepts the trend (bullish or bearish) as "the new normal," the trend reverses.

We are proud to say that we don't follow the herd off the cliff each time they head that way -- because we have the right forecasting tools. On June 1, our Senior Currency Strategist Jim Martens published this bullish AUD/USD forecast (excerpt; some Elliott wave labels have been erased for this article):

Australian Dollar Saily

Excerpt from the June 1 forecast: "...AUD/USD is forming a corrective setback, either a flat or a triangle...to be followed by another push above [price target]"

This bullish forecast was based strictly on the Elliott wave picture in AUD/USD charts. Jim simply saw that the pair had reached the bottom trendline of the likely "triangle" Elliott wave pattern, so a strong rebound was due in the next wave of the pattern.

Today, after 6 weeks of rally, the AUD is "still surging," as it has become "an attractive investment." But you already know how rapidly this tune will change once the trend reverses.

 


Jim Martens has the near- and long-term AUD/USD price targets inside his Currency Specialty Service for you right now.

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• How the Wave Principle can help improve your forex success
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This article was syndicated by Elliott Wave International and was originally published under the headline Australian Dollar: "Still Surging" -- Why, Again?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

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