Will AUD/USD Be a Late Bloomer to the USD Correction?
If you prefer a quiet nap during cloudy afternoons, then AUD/USD is a market to consider. While many of the markets are increasing in volatility, AUD/USD continues to chop around sideways in a range. US Dollar has been weakening over the past few days and AUD/USD appears aloof.
Though it may be difficult to imagine right now, the Elliott Wave model suggests the next big move for AUD/USD may be to the upside. It appears AUDUSD may be in a (b) wave or ‘x’ wave consolidation. In both instances, those patterns suggest another move to the upside over the coming weeks to retest 78 cents.
Model 1 – (b) wave consolidation
The left side of the chart above depicts a (b) wave correction that may continue to drift lower and retest 73 cents and may even break down slightly to 71 cents. Under this pattern, support appears as the (b) wave ends and prices would push higher to retest 78 cents.
Model 2 – ‘x’ wave triangle
The right side of the chart above illustrates a possible ‘x’ wave triangle. Elliott Wave triangles are five wave patterns that chop sideways. It appears we may have finished the last wave or may finish it with another dip that holds above .7160.
Under this model, prices may reverse soon to the upside to begin their retest of .78. A break of the red trend line is symptomatic that the downward momentum is slowing and the mood of the market may be changing towards higher prices.
IG Client Sentiment is neutral at +1.26. This should not be too much of a surprise as prices have been in a larger corrective pattern since September 2015. If this sentiment reading begins to drop, then that would signal a shift that lines up with the overall Elliott Wave picture. Learn how to trade with sentiment with our IG client sentiment guide.
Three DailyFX analysts selected the Australian Dollar as their top trade for 2017. Read pages 13, 18, 20 of DailyFX’s Top Trades of 2017.
---Written by Jeremy Wagner, CEWA-M
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Read the recent Gold Elliott Wave article calling for $1260.
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