Technicals | Jun 16 2011
LAYMANS:
From a medium term perspective as a minimum we continue to like the bullish position of the Australian Dollar. Yet we do have some conditions attached to this remaining the case. The main one is that we would ideally like to see old resistance at 102.00 – 102.50 hold strong throughout this more immediate period of weakness. This would be a great sign of strength and bode well for higher prices to be achieved in the second half of the year. If it doesn't hold, then we will need to resign ourselves to the fact that a longer period of weakness could be about to dominate. Our preferred view though continues to sit with the former. And as such we remain committed to seeing price sustain itself above the all important support zone without waivering. When all is said and done, another solid run to the upside is what we are expecting here with the little Aussie Battler likley to push its case for new highs being achieved yet again over the coming months.
TECHNICAL:
In our last couple of reviews we have been proposing a very bullish wave count on our chart. And that aligns the thinking that what we have evolving here is a subdividing 5-wave move within an intermediate degree wave-(v). If the patterns continue to unfold to plan, then the next target if a breakout above 110.00 occurs will be 115.00 as a minimum, with more still to come. What we are looking at shorter term though is a period of weakness, as the smaller degree a-b-c move within the proposed wave-ii looks to continue to unwind lower towards our typical retracement zone. The 50.0% retracement area projects 103.60 as our minimum target, with old resistance now potentially support, wave-a vs wave-c equality, and the 61.8% pull back area all nicely providing strong price confluence aligned to 102.00 – 102.50. So this is the expected area we see price as now heading towards. Price has thus far tagged 104.40 on this smaller corrective phase, and although it is possible we head no lower, the depth of the move would be a little atypical to what we are expecting. For aggressive traders, the more typical retracement zone highlighted here, may also be a price area worthy of consideration to take an early half position in anticipation of it being a platform for the next bullish run higher. Buyer support and technical backing would be required though, especially as this would only be the first test of price tagging this old line of resistance. So this proposed support area has yet to prove itself and until it does we just need to remain open to what may lie ahead. All in all I'm still liking this from a medium term bullish perspective as a minimum. So looking a little lower, be it we don't expect anything more bearish to start dominating here, with another move higher above the 110.00 still well and truly on our radar once this minor corrective phase finally runs its course.
Trading Strategy
9/6:
Nothing has changed really. We continue to look for another bullish trading opportunity to add to our previous successful last trade. The ideal area to consider such a trade will be around our target zone circa 102.00 – 103.60. We may not get there, especially if the currency is as bullish as our wave count is alluding to. So we need to remain on alert to where buyer support may start reentering the fray, along with some technical backing. We have an element of weakness in play immediately here and this may define the next few weeks. Yet our bigger picture outlook continues to be with the bulls. And only a convicted push below 102.00 will have us reassessing this view.
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