Trade Idea: AUD/USD - Buy At 0.8740

AUD/USD – 0.8801

Recent wave: Wave v of wave (v) possibly ended at 0.9407

Trend: Sideways

Original strategy

Buy at 0.8750, Target: 0.8950, Stop: 0.8685

New strategy

Buy at 0.8740, Target: 0.8910, Stop: 0.8670

The Australian did falter below indicated resistance at 0.8928 and has fallen again, suggesting the last leg of wave c is still in progress and whilst weakness towards support at 0.8735 cannot be ruled out, loss of momentum would limit downside to 0.8700 and bring rebound later. Above said resistance would confirm low has been formed and bring stronger rebound towards next resistance at 0.9049.

Our preferred count is that wave (v) from 0.7700 is sub-divided by wave i: 0.7918, ii: 0.7859, wave iii at 0.8479 (instead of 0.8339) and wave iv correction ended at 0.8241.The move from 0.8735 itself is an impulsive move as labeled in the attached chart with wave iii ended at 0.9326 and wave iv at 0.9171 and wave v at 0.9331, hence a-b-c correction is now in progress with a ended at 0.9174, b at 0.9279 and c leg should be limited to support at 0.8735.

In view of this, we are inclined to buy aussie on next decline for such a rebound. Below 0.8670 would extend weakness to 0.8659 (100% projection of 0.9407 to 0.9735 measuring from 0.9331) but reckon 0.8590/00 would hold.

On the bigger picture, aussie's rally after breaking resistance at 0.8265 confirms our bullish count that wave C rally from 0.6248 (2 Feb 2009) has resumed and the wave (v) of this wave C has either ended at 0.9407 or may extend marginally, however, as this move is the last leg of the larger degree wave 3 of C, upside should be limited to 0.9600.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 should extend be capped below 0.9600.