Wednesday, September 24, 2014
Elliott wave analysis of AUD/USD - Next minor downside target is at 0.8805
As always let's start with the long term chart. The monthly chart show that a major zig-zag (A-B-C) from April 2001 at 0.4814 ended in July 2011 at 1.1080. Since the 1.1080 high we have seen a corrective decline. Why is it only corrective? The decline in wave A is clearly in three waves on the daily chart (middle chart) and the B-wave is clearly a triangle, That means we have two waves of the larger degree telling us, that this decline only is a correction. At this point it's unclear whether we have seen wave C end at 0.8845 and the rally to 0.9758 was an x-wave or we are in a larger impulsive C-wave decline. Both counts seems equal likely at this point, so we will need to track the lower degree count for signs, which count is the correct one. No matter which count proves correct a decline to the long term pivot point at 0.8000 is in the Cards.
If we zoom in to the 4-hourly chart (the lower chart). we can see a clear impulsive decline from 0.9505, which as minimum should be equal in length to the decline from 0.9758 to 0.8656, which will give us a minimum target at 0.8403. If we are to see a larger correction from 0.8430 that likely would stay below 0.9250, then a triple zig-zag correction is the most likely outcome, with the third zig-zag should take us down to 0.8000. If however support at 0.8403 is broken like a knife cutting through butter, then the impulsive c-wave count is correct and even strong support at 0.8000 will have a diffeculte time holding back the decline.
The next minor target on the way lower to 0.8403 is found in the 0.8785 - 0.8805 area, likely closer to the 0.8805 than 0.8785, but then we are talking 20 pips, so it doesn't really matter, where the bottom of blue wave v will be found, as more downside will be seen once the minor correction in red wave iv is over.