AUD/USD Elliott Wave Analysis

AUD/USD - 0.7897

AUD/USD - Wave iv correction from 0.8265 is still unfolding

Despite rising to 0.8156 last week, the trendline resistance (joining 0.8265 and 0.8238) capped aussie's upside and the stronger-than-expected retreat from there on cross-selling versus Japanese yen due to risk aversion suggest the wave iv from 0.8265 wave iii top is still unfolding. In this case this wave iv could be a complex correction with first set of a-b-c ended at 0.7777 followed by a wave x at 0.8156, then another set of a-b-c is now in progress and fall to 0.7820/30 cannot be ruled out, however, the a leg shall stay well above support at 0.7777 and bring recovery in b-leg.

Looking ahead, the downside target for this 2nd set of a-b-c as well as the wave iv would be 0.7694 (38.2% Fibonacci retracement of the wave iii from 0.6771), however, as we are still keeping our larger degree bullish count, downside would be limited to 0.7518 (50% Fibonacci retracement) and bring another upmove in wave v.

Only if aussie rises above the trendline resistance, then another test of 0.8156 cannot be ruled out but it is necessary to see a daily close above this level to bring wave v for retest of 0.8265.

To re-cap our bullish count on the daily chart, the rally from 0.6007 to 0.7270 (7 Jan 2009) is marked as wave A, the retreat to 0.6248 (2 Feb 2009) is seen as wave B and the subsequent upmove is labeled as wave C and formed a temporary top today at 0.8265 (minor wave iii), above would extend to 0.8292 (1.618 times Fibonacci projection of A-leg 0.6007-0.7270 measured from B-leg trough at 0.6248) and possibly towards 0.8383 (50% Fibonacci retracement of 0.9851-0.6007) and major resistance at 0.8520 (22 Sep 2008) should remain intact.

The long-term uptrend started from 0.4775 (2 Apr 2001) with an impulsive structure. Wave I is labeled as 0.4775 to 0.8797 (24 Jun 2002), wave II has ended at 0.5231 (5 Aug 2002) and wave III rally was capped at 0.6828 (4 Jul 2003) with corrective wave IV was contained at 0.6364 (2 Sep 2003) before rallying to 0.9851 (15 Jul 2008) to end wave V. The corrective fall from last year's high of 0.9851 (15 Jul 2008), the quick and fast selloff was mainly due to the derivative trading and therefore, we are treating the decline as a simple A-B-C type of consolidation with A: 0.7800 (17 Sep 2008), B: 0.8520 (22 Sep 2008) and wave C has ended at 0.6007 (27 Oct 2008) which formed a larger degree wave (A).