AUD/USD: Up then Up ... or Up then Down?


The Australian dollar is rocking and rolling. The move is very much in line with our expectations in the analysis we provided last week and the week before. And, as I see it, there are two possible scenarios once AUD/USD hits the $0.9330 level ...

To teach what we preach, the first Aussie chart shows the near-term 61.8% Fibonacci retracement target. That retracement is accompanied by a nearer-term 100% Fibonacci extension level. Basically, that confluence of Fibs is likely to pose at least some resistance:

After that level is achieved, I see two potential outcomes (based on Fibonacci levels.)

Outcome #1: UP

Lending credence to this view, the end of the Aussie's strong downside move this year represented a 61.8% extension. In other words: the Aussie may have higher to climb in order to sufficiently retrace this larger decline:

But there is potential for the Aussie's drop to continue (especially if you want to think about it in the context of our expectations for a rising US dollar too) ...

Outcome #2: DOWN

Rather than a third-wave extension of just 61.8%, the Aussie may embark on a third wave that extends at least 100% of the larger third wave down:

Granted, these are longer-term setups we're looking at here. Maybe you trade forex in these time frames; or maybe you don't.

One could use the CurrencyShares Australian dollar Trust (symbol FXA) to take these sort of positions. Or one might consider managing shorter-term trades based on the key Fibonacci levels within these larger setups.

In fact, I know that's how Jack prefers to play it.

He uses these Fibonacci levels and modified Elliott Wave in short-term time frames to make profitable decisions for his BSFX members. Wanna be one? Subscribe here ...