AUD/USD – 0.7685
Aussie dropped in line with our bearish expectation, our short position entered at 0.7870 met downside target at 0.7670 with 200 points profit, however, as price has recovered after finding support at 0.7625, suggesting consolidation above this level would be seen and initial recovery to 0.7720-25 is likely, however, reckon 0.7780-85 would limit upside and bring another decline later, below said support at 0.7625 would extend the decline from 0.8125 top for retracement of early upmove to 0.7570, then towards 0.7520 but near term loss of momentum should limit downside and reckon 0.7500 would hold.
We are keeping our count that top has been formed at 1.1081 (wave 5 of V) and major correction (A-B-C-X-A-B-C) has commenced, indicated downside targets at 0.7945 (61.8% Fibonacci retracement of entire rise from 0.6007-1.1081) and 0.7750 had been met and downside bias is seen for further weakness to 0.6800, then 0.6700 but reckon 0.6500 would hold from here.
Our preferred count is that the rally from 0.6007 to 0.7270 (7 Jan 2009) is marked as wave A, the retreat to 0.6248 (2 Feb 2009) is wave B and the subsequent upmove is labeled as wave C with wave (iii) and wave (iv) ended at 0.8265 and 0.7700 respectively and wave (v) as well as 3 ended at 0.9407, then wave 4 ended at 0.8066 (instead of 0.8578). The wave 5 has met our indicated projection target of 1.1060 and could ended at 1.1081, this level is now treated as the peak of wave (C) as well as larger degree wave B, hence major fall in wave C has commenced, our initial downside target at psychological support at 0.7000 has just been met and further weakness to 0.6500 would be seen later.
On the upside, expect recovery to be limited to 0.7720-30 and bring another decline to aforesaid downside targets. Above 0.7795-00 would defer and risk a stronger rebound but only break of resistance at 0.7897 would abort and signal low is formed instead, risk test of previous support at 0.7908, break there would signal first leg of decline from 0.8125 has ended instead, bring a stronger rebound to 0.7940-50 but upside should be limited to 0.8020 and bring another decline later. A daily close above 0.8020 would risk test of 0.8080 but only break of resistance at 0.8103 would signal correction from 0.8125 has ended, bring retest of this level first.
Recommendation: Short entered at 0.7870 met target at 0.7670 with 200 points profit and would sell again at 0.7720 for 0.7520 with stop above 0.7820.
Our alternate count on the daily chart treated the top formed in 2008 at 0.9851 could be a larger degree wave I and was followed by a deep and sharp correction in wave II to 0.6007 and wave III is unfolding from there.
The long-term uptrend started from 0.4775 (2 Apr 2001) with an impulsive structure. Wave I is labeled as 0.4775 to 0.9851 (15 Jul 2008), wave II has ended at 0.6007 (Oct 2008) and wave III is still in progress which may extend further gain to 1.1265.