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Trading On The Mark

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Trading On The Mark

Our work is grounded in several technical methods. We make use of Elliott Wave, Gann techniques, Fibonacci relationships in price and time, cycles, and other…

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Australian Dollar Still Accelerating Downward

The Australian Dollar (AUD/USD) has offered an excellent trade during the past two weeks - something we alerted our readers to on Sept. 8. However, the opportunity probably isn't over. Another good trade setup appears due to arrive just a few days hence. We believe AUD/USD is preparing for the next strong thrust down, perhaps making up for lost time as it catches up with some of the other USD crosses. In this article, we hope to show the reader where to look for the next turns.

The monthly chart, below, gives some perspective on the expected magnitude of the developing downward move. AUD/USD found resistance at the top of the channel early in 2013 - an area which also represented a 1x1 price measurement from the 2001 low - and it produced two exhaustion signals from the Wave59 "nine-five" indicator. We have been treating the high of April 2013 provisionally as a lasting high.

On the monthly time frame, one sign that would increase confidence in the bearish view would be for price to remain below the July high of 0.9394 - something that appears considerably more likely after the past two weeks. The next important long-term support area is the lower channel boundary, which could meet price somewhere between 0.7500 and 0.8000 depending on time. In addition, since price poked above the upper channel boundary in 2011 and nearly touched the one-eighth harmonic of the channel, it is quite possible that price will make a similar excursion below the lower boundary to test the equivalent harmonic line in 2014 or 2015.

Australian Dollar Futures - Monthly

The weekly chart shows how price responded as expected to the 0.9433 resistance level which we had identified earlier, and how it gained momentum rapidly after a test of that area from below. This is consistent with our Elliott wave interpretation, which is that AUD/USD began in early July to move downward in a wave [iii] or [c] - either of which would be expected to produce a powerful move.

Australian Doillar Futures - Weekly

The daily chart, below, shows what every trader hopes to see and get in on - a third wave inside a third wave. However, in this case the opportunity may be even richer than that.

Austrlian Dollar Futures - Daily

On the weekly chart, we established that price probably is moving down in wave [iii] or [c]. (A 'c' wave can be thought of as almost equivalent to a third wave in most respects.) Then, on the daily chart, our labeling shows how a lower-magnitude, nested wave [iii] may have begun in late July. Inside that, a yet smaller-magnitude wave (iii) appears to have begun in September as price fell away from the resistance area mentioned earlier.

In addition, based on recent price action, it is possible that an even smaller-magnitude wave iii began on September 11, and even that third wave could extend to include a lower-magnitude five-wave structure. Note, we describe the waves as having lower magnitude as one moves deeper inside the fractal, but we do not describe the waves as smaller. In fact, they can move price quite far.At our website, we offer some guidelines for traders to consider in this scenario.

 

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