AUSSIE: Intermarket Analysis and Elliott Waves are Pointing Higher

2 years ago 438 views 3 min read

Grega Horvat

Analyst

Forex Analytix

AUSSIE: Intermarket Analysis and Elliott Waves are Pointing Higher

If you are in our FACE webinar from time to time and you track some of our Elliott wave coverage there, then you will know that I highlighted a bullish look for the Aussie for 2023. The reason is a strong and clearly impulsive bounce from October 2022 low. Notice that next to JPY and NZD, AUD is one of the strongest as well when compared to EUR, GBP or CAD. One of the reason for strong aussie is also China reopening, and lower USD of course due to lower US yields on speculations that FED is going to stop the hiking policy. On the other hand, inflation in a Australia is not coming down either. In fact, latest data shows jump in CPI figures, so RBA can remain on the hawkish side.

However, we know that market dynamics and cycles will change, and that there will always be pullbacks. Well, with the wave principle we can be one step ahead of an important trend or reversal, since certain patterns helps us to predict the next wave based on current stages of sentiment and crowd psychology. The most basic and simple pattern is impulse; a five wave move that puts correction in play. So, when looking at the AUDUSD daily chart above, I think rushing into some short-term longs up here can be a bit late, since I realize that there can be a new setback coming. The ideal zone for a next strong bounce would be at former wave four, at 0.66-0.67 range.

One of the reasons why we should be aware of some pullbacks is also DXY, which shows fifth wave down now headed into big 100 level. So again, current extreme USD short positioning can cause the opposite of what majority expects.

For a longer-term AUDUSD view it’s important to keep an eye on USDCNH, which shows a top at the upper side of a channel. So even if weakness on the pair is a temporary in favour of the CNH, there is still room towards the lower side of a channel which can be supportive for Australian USD.