Trade Idea: AUD/USD - Exit long entered at 0.8750

Trade Idea: AUD/USD – 0.8755

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

Trend: Sideways

Original strategy : Bought at 0.8750, Target: 0.8900, Stop: 0.8685

New strategy :

Exit long entered at 0.8750

As the Australian dollar has remained under pressure, suggesting downside risk remains for the wave v of c leg from 0.9197 to extend weakness towards 0.8697 (1.618 times projection of wave a from 0.9324 measuring from 0.9197), however, downside is likely to be limited to 0.8640/50 and risk remains for a rebound later this week.

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 and wave v (with wave (4) of v ended at 0.8568) has ended at 0.9407.

In view of this, we are exiting our long position entered at 0.8750 and stand aside in the meantime. On the upside, above 0.8835 would be the first sign that temporary low has possibly been formed but break of resistance at 0.8870 is needed to confirm and then stronger correction to 0.8912 would follow.

Looking ahead, above 0.9015 (previous support turned resistance) would encourage for test of 0.9055 (tentatively wave i trough), break there would extend gain to 0.9100 but as long as resistance 0.9197 holds, prospect of another decline remains. Below 0.8685 would signal the c leg from 0.9197 is still in progress towards 0.8600/10.

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.