AUDCAD Long Term Bullish Setup

Current Price: .8636 
Key Levels:

The weekly chart above is of the AUDUSD along, net speculative positioning (bottom in black) and net speculative positioning measured as a percentile over the last 52 weeks (blue).  A percentile reading of 0 (or close to it) indicates that sentiment is extremely bearish, indicating that a bottom is close at hand.  The bottoms are of varying degrees but bottoms nonetheless.  The percentile indicator is near 0 now, indicating potential for a bottom in the Australian Dollar.

Net speculative positioning along with the percentile indicator is plotted for the Canadian Dollar above.  A recent reading of 100 indicated a bullish extreme in the CAD and the USDCAD has started to turn up.  Given that the CAD is coming off of a bullish extreme and set to weaken and that the AUD is nearing a bearish extreme and set to strengthen, the logical trade is long AUDCAD.

Sentiment indicators are great but the greatest indicator of all is price pattern.  The decline from 1.0546-.8119 (February 2004-June 2006) is a large 3 wave decline (A-B-C), indicating that the trend of the next larger degree is up.  A 5 wave rally occurred off of the .8119 low and was succeeded by a 3 wave correction (a-b-c).  5 waves up and 3 waves down complete one 8 wave cycle and wave 1 and 2 (red) of the next larger degree.  Large wave 3 is the next move of consequence.  Wave 3 often carries at least 161.8% of wave 1.  The math provides a bullish target of 1.0531.  .8119 must remain intact and preferably .8271 remains intact.