A case for an AUD/USD implosion and what it means for risky asset classes

[afarghaly9]

A Case for AUD/USD implosion and what it means for risky assets!

As most of you guys know, I'm as bearish as anyone could get on the AUD/USD all the way back to a quarterly time frame. For those of you that haven't read my previous post, Here's a quick recap of the longer term wave counts.

Now going down to a shorter timeframe to look at the recent declines in this currency pair. It is evident that we have a leading diagonal. I'm labelling it a wave 1 not only because of my longer term bias. The market was kind enough to give us signals to expect a prolonged move to follow this correction as visible on the chart bellow

Points to note:
1) A leading diagonal's typical position are in the begining of declines hence strengthens the probability of the labelling
2)A leading diagonal typically signals an extention to come
3)Expanded flats occur before or after an extention. We can clearly see that its before in this case.
4) If a correction takes a prolonged time to complete it usually is a signal of highly volatile moves to follow.

Every single guidline that 'signals' an extention is met in this case. We have a strong case, to say the least, to expect a 1.618x target from the upcoming move to the downside. The wave to follow will adhere to alot of wave 3 characteristics, hence my wave 1 labelling of the recent declines during may.

Now we know how good the AUD/USD has been as a guage for risk. With such a wavecount on this pair I think it is irresposible, to say the least, to be bullish on any of the 'risky' assest classes. They may not top together always as visible on the chart bellow, But It is certainly a warning

Happy Trading
Ahmed Farghaly

 

[Jason101]

Wow, that looks like a lot of work.

Why not just trend follow it on a break out, it has to be easier than trying to predict it.

 

[afarghaly9]

Well, this certainly is the most probable scenerio, everyone has different entry criterias. The outlook is just a road map, but entry should be at confirmation levels hence my 'FIRE!!" level to some thier entry criteria may differ.

Happy Trading
Ahmed Farghaly

 

[BeginnerJoe]

This thing is on an up trend. I would buy.

 

[afarghaly9]

Certainly joe, But the reccent declines are of greater technical significance that any of the other 'pullbacks' since the lows in 2009. The trend has been redefined by the leading diagonal formation talked about and explained on the 'thread starter' post

 

[Jason101]

Your 8h chart shows a failed head and shoulders. Sometimes the failure of such a well known pattern shows great opposing strength, in that t/f at least.

 

[afarghaly9]

Your 8h chart shows a failed head and shoulders. Sometimes the failure of such a well known pattern shows great opposing strength, in that t/f at least.

hence the steep rally last week. I see us turning arround early next week, If this wave interpretation is correct. Tidal waves of selling pressure shall kick off next week.

P.S. The 8 hr chart is not updated. The 4 hour price chart and the s&p overlay chart are till today's price action the other charts are from older posts i've made on my blog

 

[BeginnerJoe]

hence the steep rally last week. I see us turning arround early next week, If this wave interpretation is correct. Tidal waves of selling pressure shall kick off next week.

It's very brave of you to make such a precise prediction. Are you going to put any money on it ? For the tidal wave to materialize, the dollar has to strengthen across the board. I don't see that happening, as it is weakening just now. Calling the top or the bottom is a very dangerous game. I hope your diagonals are as good as you think they are. In any case, both the immediate and longer term trends are upwards, with the intermediate trend downwards. The odds against your being right is 2 trends to 1 trend.

 

[Jason101]

I shall watch the pair out of interest and see if any of my set ups agree to let me take a short.

 

[BeginnerJoe]

I await with bated breath the tidal wave. I love surfing them forex pips when the direction is clear cut.

 

[Jason101]

It's very brave of you to make such a precise prediction. Are you going to put any money on it ? For the tidal wave to materialize, the dollar has to strengthen across the board. I don't see that happening, as it is weakening just now. Calling the top or the bottom is a very dangerous game. I hope your diagonals are as good as you think they are. In any case, both the immediate and longer term trend are upwards, with the intermediate trend downwards. The odds against your being right is 2 trends to 1 trend.

Blue reply - Good results today, could be the begining?

Red reply - ????

 

[BeginnerJoe]

Blue reply - Good results today, could be the begining?

Red reply - ????

What good results ? The market is buying EUR, CAD and AUS currently, with GBR going flat against USD. This trend will continue into next week.

Red reply: don't go against the trends.

 

[afarghaly9]

It's very brave of you to make such a precise prediction. Are you going to put any money on it ? For the tidal wave to materialize, the dollar has to strengthen across the board. I don't see that happening, as it is weakening just now. Calling the top or the bottom is a very dangerous game. I hope your diagonals are as good as you think they are. In any case, both the immediate and longer term trends are upwards, with the intermediate trend downwards. The odds against your being right is 2 trends to 1 trend.

My sell stop is 1 tick bellow the "Fire" level. But you certainly shouldn't... enter when your entry criterias are met, To me my entry criteria is met at a break bellow 1.0670. I'm just raising awareness of this high probability shift. I certainly wouldnt open a position on someones oppinion either, Unless I'm in aggreement. So if the trend does change next week I'm sure we'll be in agreement sooner or later and everyone will get a nice bite of the move. But what i would say with certainty is DO NOT buy at current levels

 

[Jason101]

what good results ? the market is buying eur, cad and aus currently, with gbr going flat against usd. This trend will continue into next week.

Red reply: Don't go against the trends.

ism

 

[afarghaly9]

ism

The dollar rally will most likely not be due to good economic data. It will rally as risk aversions revisits.

 

[afarghaly9]

AUD/USD LEADING DIAGONAL MACD EVIDENCE

The MACD confirms the leading diagonal interpretation. A guidline of a diagonal pattern is divergence between alternate legs which should take the shape of a contracting triangle on the oscilattor. In this case this guideline is clearly satisfied.

Happy Trading
Ahmed Farghaly

 

[afarghaly9]

USD/CHF identical pattern to today's AUD/USD

The is a picture of a USD/CHF 2 hr chart in may 2011. We hae the same exact pattern as we have today in the AUD/USD.

USD/CHF

AUD/USD

We can clearly see that both patterns kick off in a leading diagonal wave 1. Expanded flat wave 2 (almost complete in the AUD/USD) Momentum supports the diagonal interpretation in both cases.

Now lets look at how the swissy trade turned out.

History tells us that when these patterns (Leading diagonal and expanded flat) Happen ajacently, we can expect highly volatile moves to follow (especially if the expanded flat takes more time that usual to terminate)

Happy Trading
Ahmed Farghaly

 

[marbig]

But what i would say with certainty is DO NOT buy at current levels

It is good to see that you are prepared to remain flexible in your trading. :cheesy:
The next 3-4 weeks will see big arguments between the Democrats and the Republicans as the whether the US debt ceiling will be lifted. This will probably weaken the USD.
And the trend over the last two years in the AUD is to go higher.
I am keeping an open mind on the direction of the AUD and am prepared to do what the market shows me to do.

 

[afarghaly9]

I presented my case.. What you do with it is up to you

 

[afarghaly9]

where are all the ozzy bears @?