Is minor wave 4 over or was this just the first leg down in a flat correction?
Looking at minor wave 2, which was a zig-zag correction, then wave 4 should be a flat or a triangle duie to the principle of alternation. So the most likely outcome is that this was only wave a of 4. If this is correct then wave b of 4 should rally to near 1,120.85 and then wave c of 4 to just under 1,107.
Time will show how wave 4 play itself out.
I agree with your S&P upside target here, but that causes me to think that Tuesday's prediction for the AUD/USD pair might be flawed, and see considerably more upside? The two have developed a very high correlative, and if this upside S&P target is correct it would be very surprising to see the AUD suddenly break from its tracking relationship with the index and stay relatively muted...
ReplyDeleteThe AUD has largely played out amplified S&P movements. Do you think maybe we are wrong, and there might be a fair bit more to the upside of the Aussie?
Hi Mimi,
ReplyDeleteYou are absolutly right about the S&P 500 correlation with the AUD/USD pair, but these correlation just have a way to suddenly disappear, whenyou least of all expectes it. As the AUD/UDS pair turned on the exact day, where wave 2 has take 1.618 times the days wave 1 took, that adds confidence in the turn being important. Further more the decline from 90.68 to 89.10 does look impulsive. Also adding confidence in my view that a top could be in place. We should not see a break above the 78.5% retracement target at 90.34 as that would call for a continuation higher towards 91.09.
So you do have a nice risk/reward trade at this time, where AUD/USD trades near 90.21. I would put in a stop at 90.70. It doesn't get much better than this.
Yes I agree actually; the drop from Tuesday's high looks impulsive, and this presents a great risk/reward setup ...and I am currently short this pair. Let's see how it works out!
ReplyDeleteThanks for your analysis :)
All eyes on the S&P to end the week. Onwards and upwards...