AUDUSD to 0.60 in short orderThanks for viewing,
This is my tentative view on the AUDUSD pairing over the rest of the year.
FOREX loves to stay within a channel, this pairing is no exception. In my view the market weakness is about to steepen. What was trend-line support is now resistance.
Look there are a lot of pretty colours, so I must be right.
1. There is some weakness shown by the daily candle - doji with long wicks - its an indecision candle right at the 55EMA / upper trend-line of my new speculative channel (5 channel touches - the previous channel had 12 touches). A channel with less than 4 touches is speculative, this one is plausible.
2. I count wave 1 down (of wave (C)) - all five sub-divisions showing normal extensions and no overlap. Then there was another wave 1 and 2 (or (i) and (ii) to hunt all the stop-loss positions from people / organisations that were short. For the Elliot Wave viewpoint to hold this should result in even more volatile downward price movement (especially to stay within this much steeper channel) as wave 3 of wave (C) develops. Wave (iii) of wave 3 will be vertical and there will be a lot of gaps (that won't be filled for some time).
3 Since the start of 2021 everything above the 55EMA was over-valued (opaque red boxes) and most of the price action happened below the 55 EMA. Over the past 18 months, you would have been very profitable if you sold / shorted every time the price dropped below the 55EMA (eight out of 9 times at least). Now there is a good chance that the price won't be above the 55EMA for some months (traders catch on the the 55EMA upwards cross-over is a rally that should be sold into rather than bought).
4. There is precedent for this over years past. Once the price drops down below the channel, support becomes resistance and the price drop speeds up - making a new steeper channel. If this new channel is valid, the price will have to go almost vertical to stay within its bounds.
5. I put some support levels - based on previous price action - that if you don't believe in others do and will target to exit or reduce short positions / buy. I see a deep drop to 0.63-0.64 and the down to 0.6 or maybe a little bit further. This is based on
- channel support turned resistance,
- EMA resistance,
- 1.618 fib extensions of wave 1 and of wave (i) and (ii) of wave 3,
- Support swing lows,
- Channel support and resistance (from March to May 2020), and
- Elliot wave (wave (C) always has 5 sub-waves) and normally extends roughly 1:1 of wave (A) (sometimes less sometimes more).
So, what will I be looking for over the next days to a week?
1. Another indecision candle on below average or low volume, or an inverted hammer on low volume with a similar size wick to the upside. Followed by higher volume as the price drops from current levels. If you go short don't have the stop-loss too close to the swing high as professional traders will look to stop you out of the trade before resuming the down-trend.
2. My speculative channel to remain largely intact.
3. What is labelled as wave 1 swing low of 0.68290 to remain intact and to not be exceeded by subsequent pull-backs in price.
4. Watch out below.
Just look back in the past... In economic down-turns the money goes home (or goes to) to the US for safety. It doesn't stay in the AUD even though the bond return is marginally higher. I don't think this is a comment on the strength of the Aussie economy, it's just a flight to safety and away from uncertainty.
Protect those funds and happy trading. Anyone who is left at the end of my essay CHEERS. Hopefully, whether you follow EW, or channels, or fibonacci extensions, candle patterns, or support and resistance, or something else. I have still made a good case.
