The concerns in Asia trading are dragging on the value of the Australian Dollar. Should these stresses continue, the EUR/AUD cross pair could be a beneficiary of flows meaning the EUR is outperforming against AUD.
The Elliott Wave patterns support a move higher as well. The question is from where? Current levels or lower levels. In these scenarios I’ll look to buy a breakout or buy a dip to hot zones of price.
Market Interpretation #1
Market Condition: Breakout
Bias: Buy EUR/AUD
Entry: 1.5600
Stop Loss: 1.5265 (-335 pips)
First Target: 1.6400 (+800 pips)
Second Target: 1.7800 (+2200 pips)
Market Interpretation #2
Market Condition: Retracement
Bias: Buy EUR/AUD
Entry: 1.4630-1.5000
Stop Loss: 1.4325 (-305 to -675 pips)
First Target: 1.6400 (+1400 to +1770 pips)
Second Target: 1.7800 (+2800 to +3,170 pips)
EUR outperformance to AUD
[Image 1]
In Elliott Wave terms, an impulse wave completed the last time the stress to the Asian markets were alleviated in August 2015. Since then, prices have corrected lower nearly reaching the 78.6% retracement of the April 29, 2015 to August 24, 2015 up trend. This is a common retracement level for a wave 1-2 combination. If this count works out, then we may have embarked upon a purple wave 3 of a red wave 3 higher that could carry multiple thousands of pips.
In a lower probability count, it is possible, that price stalls below 1.56. That would indicate we are finishing a ‘B’ wave of a small expanded flat that could drive prices back to 1.5000. If so, then we will look for a dip to buy a retracement near that level.
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