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

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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 ...

-JR

 

 

 

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