Saturday, 17 March 2012

AUD/USD looks set to rally

Today I will look at the AUD/USD weekly, daily and hourly charts, plus possible Elliott Wave counts on the weekly and daily charts. On balance, these charts suggest that the AUD/USD is beginning another rally to just beyond the 2011 highs. How does this fit with my view that the S&P 500 is wedging in to a top? As I've said before, it's best to analyse individual markets on their own merits. Correlations come and go.

The weekly chart shows a likely impending bullish cross of the 18 and 40 week moving averages. Last week's candle was a bullish hammer.

The daily chart shows that the market has rebounded from a trend line drawn from near the October lows. It also shows bearishly crossed 18 and 40 day moving averages, which indicates a down trend at this time frame, warning that any bullish stance we might take would need tight risk control.

Zooming in to the hourly chart, we see that the market has rallied through the trend line drawn from the late February high.

The next chart shows my current big picture Elliott Wave count. The points where B tops and C bottoms are pure guesswork, though it is common for a correction to complete near the end of the preceding 4th wave.

The final chart zooms in and shows a possible Elliott Wave count for wave B of the above big picture count. The current portion of the count, a five wave move (1-2-3-4-5) is high confidence, even more since the just completed a-b-c saw c reach a 1.618 times the length of a (thanks to reader MH for pointing that out to me). Obviously a wave 5 is required to finish the sequence, and wave 5 likely began late last week.

S&P 500 wedging in to a top

ASX 200 range bound

EUR/USD daily chart

The bearishly crossed 18 and 40 day moving averages indicate that the trend is down, but the close proximity of price to that cross makes it a weak signal unless the market heads lower immediately.

Gold daily chart

Silver daily chart