After a brief consolidation at the turn of the year, AUD/NZD continued its descent this week, falling to 1.0392, a record low. Let’s examine the charts from intra-session up to the long-term time-frames.
Consolidating at New Lows: In the recent couple of sessions, AUD/NZD started to consolidate roughly between 1.0392 and 1.0435. The market is bearish so the favored scenario is a break below 1.0390 into fresh record lows. If it breaks above 1.0435, we should look out for resistance around 1.0480. There is a cluster of resistance including the hourly SMAs, a support/resistance pivot, and a falling speedline. In this bearish continuation scenario, we should also see the RSI reading hold below 60.
Bearish Continuation: Jumping to the weekly chart, we can see that there could be a secular bearish trend developing since 2011 when AUD/NZD peaked at 1.3794. 2014 could be summarized as an attempted price bottom and a bullish correction. The correction respected previous support levels and resistance and we are now seeing another leg to the “secular” downtrend.
Bearish Candlestick Combination: In the weekly chart, we can also see another bearish continuation signal forming this week. The last 3 weekly candles show a harami, then a bearish engulfing candle. This represents a pause, and then a decision to continue the prevailing downtrend.
Elliott Wave Projection: At this point there are no support levels below 1.0390. One method of projecting the current bearish swing (since September), is an Elliott Wave projection observed in the monthly chart.
In the monthly chart, we can see a bearish impulse wave forming since the 2011-high of 1.3794. Based on Elliott Wave principles, we would project the current wave “V” to be similar to wave “I”. The length of wave “I” is 1478 pips. When we project this from the start of wave “V” at 1.1304, we get a target of 0.9826.
We can always debate the accuracy of EW projections. But we should be aware that this projection at least puts the parity level (1.00) in sight.
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