Technicals | Jan 29 2014
Bottom Line 28/01/14
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Technical Discussion
Our suspicions that a double bottom would not play out here have now been confirmed. 88.50 has failed to hold in between reviews and prices have now pushed lower down to 86.60 as of a couple of sessions ago. Are we now in a position to be calling a low ? Well basically the answer is no. It doesn't mean one is not locked in, it is just to say that at this particular point in time, it's way too early to tell. If our labeling is correct though, since the 97.50 highs were locked into place back in October last year, price may now well be evolving within the final leg of such a move.
In our last review, we had tentatively locked in a lower degree wave-v of an intermediate wave-(iii) at 88.2. Our expectation then was for a wave-(iv) to start unfolding potentially back up towards 91.20 which was the typical 38.2% retracement that wave-(iv)'s generally stretch towards. And on the 13th of this month price tagged all but at 90.90, with the following day clearly rejecting these higher levels once more. Since then sellers have again taken control. Yet if we have our labeling correct here, at least as far as this immediate move goes, price should now be in the final stages of a 5-wave pattern off the October highs. Wave-(v) vs wave-(i) equality had a target of 87.60 which has now been surpassed.
Yet more of interest to us longer term is the larger 50.0% pull back area which projects 85.40. And as already mentioned, the low tagged thus far has been 86.60. So we are not far off this long awaited target zone, and if price was to venture there over the coming days, then it will be an area where we will likely witness some speculative buying coming back in. We need to remember as well that the 50.0% retracement target outlined here, is actually off the larger move from the 60.00 lows achieved back in 2008. We need to also keep in mind that these moves can extend deeper into the 61.8% zone as well, which in this case comes in slightly below 80.00. This is also a very strong line of horizontal support. So as you can see the scope for lower is clearly still present. Longer term we continue to not be so pessimistic. With our larger labeling leaning towards this overall downside move as being a Wave-(2) or (B) only, with both having bullish outcomes over the coming years once the low does finally lock into place. Well oversold across all time frames now, so definitely one to keep a close eye on over the coming months. Especially in regards to buyer support returning the closer price gets towards 85.40.
Trading Strategy
Based on our more generalised trading strategies, I don't think we will be getting involved in the Australian Dollar for a little while now. At least not until we can see stronger evidence that a major low has locked into place. For us to be convinced of this, we would ideally like to see our 50.0% retracement target tagged, then buyers return strongly to revert price action back to the upside, and with motive. So a 5-wave move higher followed by a 3-wave counter trend move, with all the planets aligned as we like them, will basically be the trigger we will look for to consider a swing trade opportunity to the upside. And not interested in trading this short for the moment whilst our minimum target zone is so close to being attained. The rejection at the wave-(iv) 38.2% target was where the last shorting opportunity resided, yet that ship has now left the dock.
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