Australian Dollar Crosses Diverge


Commentary – The AUDCAD dropped below our stop of .8556 as well as the .8510 level, which was a prior support level. Still, the dominant pattern remains that 5 wave rally from the June 2006 low to the April 2007 high, which was followed by the decline in 3 waves to .8271. Everything since then has been unclear though. Very short term, it appears that a 5 wave decline is complete at .8488 and that the sharp advance in the last few hours is an impulse. Subjectively speaking, we favor a bullish bias against .8488.
Strategy – Bullish against .8488, targets TBD

Commentary – We wrote last week that “as the daily chart shows, a push through 106.88 would satisfy minimum expectations for the end of the rally from 85.98. A push through the July high at 107.70 seems reasonable too in order to complete an even larger degree advance.” After hitting 107.84, the AUDJPY has retreated and either a correction is unfolding or a straight out reversal is underway. In either case, price is likely to come under 104.31.
Strategy – Flat (Bullish targets hit at 107.70)

Commentary – We proposed an expanded flat alternative from the outright bullish scenario last week. The decline from 1.2091 would be in 5 waves with a drop below 1.1873. That would make the first leg of wave C of the flat complete. If the expanded flat is unfolding, then price will eventually come under 1.1592 prior to the next bullish leg.
Strategy – Exit bullish position.