Trade Idea: AUD/USD - Sell At 0.7805

Recent wave: Wave iv of c ended at 0.7864

Trend: Near term down

Original strategy : Sell at 0.7890, Target: 0.7755, Stop-loss: 0.7940

Our trading strategy : Sell at 0.7805, Target: 0.7680, Stop-loss: 0.7865

The Australian dollar met renewed selling at 0.7864 yesterday and retreated from there today, this move has retained our bearish count on aussie and suggests the wave iv correction from 0.7723 has ended at 0.7864 and the c wave decline from 0.8039 should resume in wave v for retest of 0.7723, then to 0.7669 (61.8% projection of wave i to iii from iv at 0.7864), however, sharp fall below there is not expected and price should stay well above 0.7591 (1.618 times projection of wave a measuring from 0.8039).

To recap our latest preferred count, the prolonged wave iv from 0.8265 is still unfolding in the form of a double three and the fall to 0.7777 is treated as the first set of a-b-c, followed by wave x at 0.8156 and second set of a-b-c is in progress with 5-waver a-leg ended and 3-legged wave b ended at 0.7879 and 0.8039 respectively.

Therefore, we have lowered our short entry level for this final wave v of wave c, so one must book profit on such a move and if aussie drops below 0.7723 without recovering to our indicated entry, this strategy should be cancelled. Above 0.7864 again would defer this bearish view but only a rise above 0.7918 (61.8% Fibonacci retracement of 0.803 to 0.7723) would bring stronger rebound to 0.7990/00 but it is necessary to see a break of resistance at 0.8039 to signal the entire abc-x-abc correction has ended at 0.7723.

On the bigger picture, as the prolonged wave iv is still a correction, our bullish view remains for an eventual upside break to 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