Aussie Pattern Suggests Resumption of Bull Trend
The
AUDUSD
appears to have completed a
3 wave Elliott wave
counter trend drop near a confluence of
support near 1.0650
. This is a good risk to reward ratio opportunity to buy the bull trend.
The AUDUSD has been in an uptrend for several months.
Prices
have continued to create higher highs and higher lows and just reached a confluence of 2 support levels.
First, the prices show a fairly clean Elliott Wave sequence of a 5 wave advance followed by a 3 wave (A-B-C) drop. The wave movements conform nicely to the rules of Elliott Wave
including Fibonacci retracement levels
. Many times, this 8 wave sequence (5 waves up and 3 waves down) will retrace approximately 78.6% of the original up move. The 78.6% retracement level is my favorite because it is considered by many traders to be the fib of last resort. In this pattern, the 78.6% retracement level crossed near 1.0661.
Secondly, the lengths of waves many times are related by the Fibonacci sequence. So for example, wave ‘a’ and wave ‘c’ oftentimes are related in length by a ratio of .618, 1.000, or 1.618. In this case, the length of wave ‘c’ is 1.000 times the length of wave ‘a’ at 1.0642. This presents a fairly tight support zone which prices did bounce higher from.
If this pattern continues to hold, it could trade to new highs on the year near 1.0900
as higher yielding instruments
suggest
a risk ‘on’
trading environment.
Enter long near the market price with a stop just below the swing low near 1.0635.
Risk less than
5% of your account
on all open trades.
Trade with less than 10 times
effective leverage
.
—Written by Jeremy Wagner, Lead Trading Instructor,
Education
To contact Jeremy, email
. Follow me on Twitter at @JWagnerFXTrader.
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