AUD/USD – 0.7985
Although aussie slipped initially last week to 0.7871, as renewed buying interest emerged there and the pair has risen again, retaining our bullish view that pullback from 0.8066 has ended at 0.7808 last month and upside bias remains for further gain to 0.8040-45, however, break of said recent high at 0.8066 is needed to confirm medium term erratic rise from 0.6827 (2016 low) has resumed and extend gain to 0.8100, then towards previous resistance at 0.8163.
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 downside, expect pullback to be limited and 0.7920-25 should hold, bring another rise later. Below 0.7920 would risk another test of said last week’s low at 0.7871 but break there is needed to signal the rebound from 0.7808 has ended, bring another fall towards this level. A break below there would shift risk back to downside for the corrective decline from 0.8066 top to bring retracement of early upmove to 0.7760 (61.8% Fibonacci retracement of 0.7571-0.8066) and then test of previous resistance at 0.7712 but reckon downside would be limited to 0.7640-50.
Recommendation: Hold long entered at 0.7920 for 0.8120 with stop below 0.7920.
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.