Australian Dollar testing resistance zone

Keeping with our focus on currencies in recent weeks, we wanted to provide readers with an update on the Australian Dollar. When we last posted charts in April 2016, we suggested that futures could find resistance near the 0.77 area, and price has been unable to break that area in the months since. Now that the Elliott wave pattern has matured some, we can identify the areas to watch for a possible downward turn.

The monthly chart implies two different scenarios to describe the Ausie's climb from its 2015 low, but both scenarios would call for the rally to consist of three sub-waves. Based on Fibonacci relationships among the sub-waves, likely areas for resistance for the current sub-wave include 0.7780 and/or 0.7980.

In addition to the Fibonacci levels, traders shopping for a short position should monitor the reaction of price to the boundary and the 1/8 and 1/4 harmonics of the channel width. We mention this because price has been fairly well behaved within the Schiff channel that we have drawn.

Hulse_Nov_3.jpg

Since our main bearish scenario treats the climb from 2015 as a fourth wave, we would not want to see price go above 0.8260. If price were to exceed that level for very long, it would create overlap with the prior wave [i] and would invalidate the idea of a fourth wave. However, we believe it is more likely that price will not rise to test that limit.

If the Ausie establishes a downward trend from nearby, then 0.6180 represents a preliminary target for completion of the pattern.

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