AUD/USD: A Textbook Elliott Wave Setup
EWM Interactive | Sep 17, 2014 06:03AM ET
AUDUSD lost more than 500 pips since the beginning of July. “Should we expect a reversal or the decline is set to extend?” is what probably every trader is asking.
“If this is the correct count, the 0.91 zone could be revisited, before the uptrend resumes in wave (3/C).” It was 3rd July, when that forecast of AUDUSD was made with the pair trading around 0.9350 then. Two and a half months later it is time to see how the Australian dollar has been trading against the USD. But first we will show you the chart we used to make that prediction.
As always, our opinion was based on the Elliott Wave Principle. According to this method, after every five waves there should be a three-wave correction in the opposite direction. The chart of AUDUSD showed a complete five-wave sequence and that is why we were expecting a corrective decline. On the updated chart below you can see how the exchange rate has been developing ever since.
As visible, we were not bearish enough. AUDUSD fell to 0.91 as expected, but continued even lower to the 61.8% Fibonacci level at 0.8980. So, with five waves up and three waves down we have a textbook Elliott Wave bullish setup. If this is the correct count, we should prepare for stronger AUD, as long as the invalidation level of 0.8657 holds.
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