AUD/USD: A Third Wave "...Wonders to Behold..."
Updated
Prices advanced in five waves from 0.6477 to 0.6667. This wave pattern is significant because impulse waves identify the direction of the larger trend. Thus, the five-wave advance in AUDUSD implies further buying to come that would push prices above 0.6667 as wave (iii).
The subsequent decline that is developing in three waves supports this analysis. Counter trend price action typically consists of three waves, so we expect another move up. Moreover, the three-wave decline travels to 0.6550 to retrace 61.8% of the previous impulsive advance. 61.8% is a common retracement for corrective waves especially when they occur as wave 2 of an impulse or wave B of a zigzag correction.
Also nearby is 0.6558, the price level at which wave c equaled wave a, which is a common Fibonacci relationship between wave C and A of zigzag correction.
Also adjacent is 0.6560, the end of the fourth wave of one lesser degree. As a guideline, corrections tend to end upon reaching the end of the previous fourth wave of one lesser degree.
Besides, the correction is unfolding as a Zigzag A-B-C with a triangle characteristic in the b wave position as is common. Also, the correction neatly adheres to the parallel channel with wave c hugging the lower boundary of the channel.
These cluster of evidence suggests that prices are approaching an important juncture and a reversal to the upside is on the horizon. If so, then a break above 0.6629 would virtually indicate the correction ended and the next significant move is to the upside.
Trading Plan
Entry: Buy at market.
Protective Stop: 0.6477; in an impulse wave 2 can NEVER retrace 100% of wave 1.
Target: 307 pips i.e ((0.6667-0.6477) X 1.618)
In an impulse, the third wave commonly travels 1.618 times the length of the
first.
Risk-to-Reward: 1:3
The subsequent decline that is developing in three waves supports this analysis. Counter trend price action typically consists of three waves, so we expect another move up. Moreover, the three-wave decline travels to 0.6550 to retrace 61.8% of the previous impulsive advance. 61.8% is a common retracement for corrective waves especially when they occur as wave 2 of an impulse or wave B of a zigzag correction.
Also nearby is 0.6558, the price level at which wave c equaled wave a, which is a common Fibonacci relationship between wave C and A of zigzag correction.
Also adjacent is 0.6560, the end of the fourth wave of one lesser degree. As a guideline, corrections tend to end upon reaching the end of the previous fourth wave of one lesser degree.
Besides, the correction is unfolding as a Zigzag A-B-C with a triangle characteristic in the b wave position as is common. Also, the correction neatly adheres to the parallel channel with wave c hugging the lower boundary of the channel.
These cluster of evidence suggests that prices are approaching an important juncture and a reversal to the upside is on the horizon. If so, then a break above 0.6629 would virtually indicate the correction ended and the next significant move is to the upside.
Trading Plan
Entry: Buy at market.
Protective Stop: 0.6477; in an impulse wave 2 can NEVER retrace 100% of wave 1.
Target: 307 pips i.e ((0.6667-0.6477) X 1.618)
In an impulse, the third wave commonly travels 1.618 times the length of the
first.
Risk-to-Reward: 1:3
Note
The count favours a double zigzag wave (ii) from 0.6667 high that should find support near 0.6518; the 78.6% retracement of wave (i)in.tradingview.com/chart/F3TpD0NQ/?symbol=OANDA:AUDUSD
Note
AUD/USD has advanced a bit further from 0.6504, which ideally serves as the wave (ii) low. Breaking above 0.6667 would bolster the idea wave (iii) is underway.in.tradingview.com/chart/F3TpD0NQ/?symbol=OANDA:AUDUSD
Note
The rally from 0.6504 subdivides into three waves which is a corrective characteristic. The decline from 0.6667 to 0.6504 subdivides into five waves, wave a. So the entire formation from 0.6667 high is a Zigzag correction.For this bullish outlook, price action must stay above 0.6477
in.tradingview.com/chart/F3TpD0NQ/?symbol=OANDA:AUDUSD
Note
The rally from 0.6504 subdivides into three waves which is a corrective characteristic. The decline from 0.6667 to 0.6504 subdivides into five waves, wave a. So the entire formation from 0.6667 high is a Zigzag correction.For this bullish outlook, price action must stay above 0.6477
in.tradingview.com/chart/F3TpD0NQ/?symbol=OANDA:AUDUSD
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