Australian Dollar Bulls Shouldn't Give Up Yet

Last week, the AUDUSD reversed just pips shy of .9500.  So was that the top?  It could have been, but patterns and Fibonacci relationships on multiple time frames suggest that the AUDUSD will make one more high in order to complete a 7 year bullish cycle. 

The monthly chart of the AUDUSD displays a beautiful Elliott wave pattern.  The decline from the early 1970’s was a textbook 5 wave decline.  Waves 2 and 4 satisfy the alternation guideline (wave 2 is sharp and wave 4 is a flat).  Wave 3 is extended and wave 5 an ending diagonal.  From the low at .4775 in April 2001, an A-B-C correction has taken shape.  Wave C would equal wave A (a common relationship) at close to parity (.9998 to be exact).

The weekly chart zooms in on the A-B-C advance from the 2001 low and in particular wave C from .6771 (July 2004 low).  As is evident on the chart, the rally through the November 2007 high at .9400 satisfies minimum expectations for wave 5 of C.  The next chart shows why we still expect a test of 1.00 before the major reversal takes place.

The 60 minute chart zooms in on the rally from .8512 (January low).  The rally from .8512 is viewed as wave 5 of large C.  So far, there are only 3 waves complete to .9496.  The drop to channel support is wave 4 and may be complete at .9218.  If .9218 fails to hold, then look the wave 4 low to form close to .9111; the former 4th wave.  If price drops below .8874, then the probability increases significantly that a multi-year top is in place at .9496.