Trade Idea: AUD/USD - Sell At 0.8845

AUD/USD – 0.8686

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

Trend: Sideways

New strategy

Sell at 0.8845, Target: 0.8600, Stop: 0.8910

Despite falling to 0.8578 last Friday, the rebound from there suggests the minor wave iii of recent C leg decline from 0.9331 has possibly ended there and consolidation would take place in wave iv and recovery towards 0.8846 (38.2% Fibonacci retracement of wave iii from 0.9280 to 0.8578) would be seen, however, renewed selling interest should emerge there and bring another decline later.

Our preferred count is that the major rise from 0.6007 a wave (B) and the wave C of this 3-legged (B) commenced from 0.6248 which ended at 0.9407. then the fall from 0.9407 to 0.8735 is wave A and the rise from 0.8735 to 0.9331 is re-labeled as a-b-c wave B (as marked in the attached chart). Therefore, the decline from 0.9331 is the wave C with minor wave i ended at 0.9175 and wave ii at 0.9280, hence wave iii is still in progress and may extend to aforesaid downside target..

In view of this, we prefer to wait for subsequent recovery to enter short for another decline in wave v. Below said support at 0.8578 would extend weakness towards 0.8500 (1.236 times projection of 0.9407-0.8735 measuring from 0.9331), however, reckon 0.8400 would limit downside due to oversold condition.

Only above 0.8929 (50% Fibonacci retracement of wave iii) would suggest low has possibly been formed and risk rebound to 0.9000 and 0.9012 (61.8% Fibonacci retracement).

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 5 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 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.