Aussie Crosses Rally off of Lows


AUDCAD – The turn lower that we have been looking for has completed its first leg. Last week’s outside reversal is bearish in the intermediate term. This weakness looks like a 4th wave decline following the large 3rd wave rally from .8288 to .9391. Corrective waves (2nd and 4th waves) consist of 3 waves (or a triangle?which is 5). The decline from .9391 to .9075 is likely the first of the 3 corrective waves that will ultimately make up the larger 4th wave. Near term, a bounce is expected to challenge fibo support, which begins at the 38.2% of .9391-.9075 at .9197. Ultimately, we look for a 4th wave correction to end near the 38.2% of .8288-.9391 at .8971.

AUDJPY – We maintain that the turn down from channel resistance reinforces the ‘topping’ argument. The AUDJPY also formed an outside reversal last week. The pair has been in an uptrend since October 2000. The portion of the uptrend since June 2004 is the 5th wave of the uptrend. The pair has traced out 3 waves within the 3rd wave. As such, this weakness is likely the beginning of a 4th wave. Initial support is at the 23.6% fibo of 82.06-96.42 at 93.03. A more pronounced decline to the 38.2% may be more likely as the 38.2% is at 90.90 and passes through former resistance from the December 2005 high at 91.32.

AUDNZD – The AUDNZD broke below the 12/26 low at 1.1137 last week but has made a V-shaped move higher and the pair is again testing a resisting trendline drawn off of the 8/1/2006 and 1/19 highs. A break above there could give way to a more pronounced correction of the 1.2490-1.1055 decline. Fibo resistance begins at the 38.2% of the mentioned bear wave at 1.1602. Resistance there is reinforced by October and November highs. A rally to fibo resistance in the coming weeks / months could give way to the longer term bearish structure (see last week’s commentary).