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Aussie Bears Are Back

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Oct 26 2017

There have been a lot of talks this year about a trend in change on AUDUSD pair as pair holds 0.6800 for two years now. Always, before you want to make a conclusion about the direction of a trend make a step back and look at weekly or monthly charts, and ask yourself. Is this uptrend or downtrend? Is recovery from recent extreme sharp or slow? Once you have answered these questions you can make a prediction for next probable move, which I think can be lower.

Look at monthly price action; I see a strong decline from 2011 high all the way down to a trendline connected from 2001. Notice that market did not go anywhere far lately, it’s just testing that trendline which can be breached in months ahead, if we consider that recovery is not looking strong from 2015; rather slow, thus corrective which is normal after that strong decline down through 2014 and 2015.



If we go even further and scroll down to a lower time frame, like a weekly chart then we can see that rise from 2015 was in three waves. And here comes the interesting part when it comes to Elliott Wave theory, which says that three wave rallies in downtrend are corrections, same like a three wave decline in uptrend that are also temporary set-backs. In other words, its just a pause within major trend, a sideways move that is trying to confuse a trader. That’s why is always important to make a step back, look at the bigger picture before make any trading decisions. Also, what we think is important is that turn down from recent high is impulsive if we look at daily chart, next to a weekly. It’s a five wave fall, not a three wave move, therefore it’s an important evidence of a new or temporary bearish trend.

There are also another inter-market relationships with gold, 10 year US notes and other markets that suggest more AUDUSD downside ahead. But we can talk about this in some other post.

Trade well,
Grega


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