It seems that markets are recovering slightly after strong push lower on stocks and commodities in this week. The only question when again risk-off trade will resume. The fact is that recent gains on AUD and now also EUR (German IFO index) are driven by news. AUDUSD found the support after RBA Governor Stevens mentioned that China’s growth slowdown has ended. Pair found the support for 80 pips, which could be erased soon if we consider that he is not satisfied with current »strong« AUD value.
With that said we are tracking two slightly different counts for AUDUSD, but both are bearish Elliott wave patterns. The first price action is showing five wave fall from 1.0366 followed by a three wave rally in wave ii) which could be counted as an expanded flat. We like this count but need to see impulsive decline from current 61.8% retracement, while 1.0366 is in place.
Well, if today market will remain strong and closed somewhere around or above 1.0330 level then we will be focused on the second wave count. This one suggests that market could rally in five waves from 1.0220 and towards 1.0400 before larger downtrend resumes.
So both counts are pointing for weaker AUD in the mid-term, and if you would like to short it don’t give up if pair will extend higher in the next 24-48 trading hours, through 1.0366. We somehow like the second wave count.
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