Trade Idea: AUD/USD - Exit Short Entered At 0.9000

AUD/USD – 0.8998

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

Trend: Sideways

Original strategy

Sold at 0.9000, Target: 0.8810, Stop: 0.9065

New strategy

Exit short entered at 0.9000

Although aussie has retreated after faltering below resistance at 0.9037, the strong rebound from 0.8879 suggests upside risk remains and break of this resistance would signal the rise from 0.8578 is still in progress and gain to 0.9100 would follow but 0.9175 should hold from here.

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 has either ended at 0.8781 or at 0.8578. In the prior case, wave iv would have ended at 0.8916 with wave v at 0.8578 only a break of 0.9175 (wave i tough) would confirm this view.

In view of this, we are exiting our short position entered at 0.9000 as below 0.8879 support is needed to revive bearishness and suggest the wave iv has possibly ended, then weakness to 0.8805/10 (approx. 50% Fibonacci retracement of 0.8578 to 0.9037) would follow. However, a firm break below there is needed to confirm and extend weakness to 0.8753 (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.