Trade Idea: AUD/USD - Buy at 0.7945

AUD/USD - 0.7978

Recent wave: Wave (2) from 0.8156 has possibly ended at 0.7905.

Trend: Up

Our trading strategy: Buy at 0.7945, Target: 0.8100, Stop-loss: 0.7895

The Australian dollar fell sharply yesterday on active cross-selling versus Japanese yen due to risk aversion after the release of weaker-than-expected U.S job data, despite dropping to a low of 0.7905, the rebound from there suggests the wave (2) correction from 0.8156 has possibly ended there and upside bias is seen, break above the 61.8% Fibonacci retracement of 0.8156 to 0.7905 at 0.8060 would confirm this view and rise to 0.8109 resistance would follow.

Our bullish count is that the wave (1) from 0.7777 ended at 0.8156 and an a-b-c correction has possibly ended at 0.7905 with a: 0.8024, b: 0.8109, c: 0.7905, Looking ahead, it is necessary to see a break of this resistance to confirm the upmove has resumed in wave (3) for retest of 0.8156, above this level would extend rise towards temporary top at 0.8265.

We are looking to buy aussie on pullback with stop at 0.7895, break there would dampen this very bullish count and fall to 0.7850 cannot be ruled out, however, price should still stay above the key support at 0.7777.

On the bigger picture, we are still retaining the view that an upside break will take place later to confirm the wave C rally from 0.6248 (2 Feb 2009) has resumed to 0.8292 (1.618 times Fibonacci projection of 0.6007-0.7270 measured from 0.6248) and possibly towards 0.8383 (50% Fibonacci retracement of 0.9851-0.6007) to end the larger degree wave (B).

To re-cap the current bullish count on aussie, the rally from 0.6007 to 0.7270 (7 Jan 2009) is tentatively 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 and possibly towards 0.8383.