{quote} What make you very confident aud will below 8800 ? when ? it seems going to 1.97 first
Anyway, here is why I am confident...
{quote} {quote}Here's my take.... Yes, Aussie (as a commodity currency) gains value during economic booms. However, that is hardly the case in Australia right now. China's raw material demands have reduced enough to leave Australia's mining sector under utilized causing some mine closures and job losses. Since Australia's export economy (which contributes to Aussie strength) is heavily dependent on raw material exports, the RBA has been on a campaign to lower the Aussie in an effort to make its mining sector more globally competitive in order to make up for the reduction in export shipments. This is an ongoing process and will take time. This year, through the excellent efforts of the RBA, the Aussie has lost most of it's bloated value against all the majors and in the last RBA policy statement, it was mentioned that the Aussie is still too expensive and further rate cuts will be necessary.
So, why is the Aussie holding strong? Well folks, currency markets don't only move for fundamental reasons. If they did, then they would move quickly in a straight line from point A (value before fundamental change) to point B (value after fundamental change) without retrace. What is also a factor (and a major one at that) is the market psychology/sentiment/technicals. If a currency should fundamentally go south, then that doesn't mean it will. First there has to be a technical scope to support such a move. Right now the technical scope is a corrective ABC move representing wave 4 of the 5 wave move down from 1.0580. This is considered a counter trend technical move (correction / retrace) of the 1700+ pip move down from 1.0580. The Aussie was way oversold at 9500 and still kept going down to the 8850 area where it was massively oversold on the anticipation that the RBA was going to cut rates again. This correction from the lows represents the repricing of a failure to meet the rate cut expectation. At that low point the Aussie was cheap, so why not buy? or at least cover your shorts which is basically the same as buying.
So, overall, this pair is bearish in the mid-term. Once this ABC correction (Wave 4) is complete, we should start to see a move down to complete the larger wave 5. However, nobody knows when that is going to happen. This wave 4 correction could start another ABC cycle to form a complex correction. It could be another sideways ABC or a 5 wave triangle sideways with a bearish tilt. Fact is that nobody knows and until such time as the RBA decides to cut rates again (or the market starts to anticipate that they will), you have to follow the techs with a bearish bias over the medium term. This means "sell rallies", but not too eagerly.
The key here is to anticipate where the top of this correction will be. Based on my technical studies using MACD, RSX, Mean Reversion, Fibos and Elliott Wave analysis, for the last couple of months I have been calling for 9500/9600 as the top. When I look at the charts now, I am starting to see bearish divergence on the MACD and RSX, price has reverted to the 200 day moving average and the 50% fibo of the 2013 high/low range. It has also reached the measured target of the inverted head and shoulders on the daily chart. Therefore, from my analysis, this is pretty much it for upside. Therefore, taking into consideration that we still need a wave 5 (which we are painting now) of C of the ABC wave 4, my call for absolute max upside is 9650, but it does not mean it will reach that high. It all depends on when the fundamental drivers kick in. All I am saying is that the pair is now technically ready to fall. So we wait. In the mean time I am cautiously building my short position and have place my first position at 0.9499. I also have a pending order at 0.9570. That's all I have for now. Once 0.9570 is triggered (if it gets triggered), then I will evaluate where to put my next order based on what price action is telling me, my overall gauge of the market sentiment and the fundamental landscape at that time.
Those who say it cannot be done should not interrupt those who are doing it
