Aussie Crosses Retrace Losses


AUDCAD – The turn lower that we have been looking for has completed its first leg and is nearing completion of its 2nd leg. Weakness from .9397 is viewed as 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. We mentioned last week that “near term, a bounce is expected to challenge fibo support, which begins at the 38.2% of .9391-.9075 at .9197.” This has happened but a spike to the 61.8% of .9397-.9073 at .9273 is still possible. 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, which the pair turned up just prior to yesterday. 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 temporarily broke above chart resistance from the 1/8 high at 1.1397 but has pulled back to trade just below the 1.1400 figure. A more sustained break looks likely given the fact that the pair has been able to hold above the 1.1400 for the better part of 2 days. Even so, 1.1277 is support in the event of a more protracted pullback. The next bullish target is the confluence of the 38.2% of 1.2490-1.1055 / October and November highs at 1.1602.