If you have read our last ARTICLE about AUDNZD, you know we had a long-term bullish outlook on the pair two months ago. We still do. However, instead of up, the cross has been going down ever since and is trading around 1.0385 as of today. We know it could be difficult to stick to the plan, when the market has been moving against you, so now we are going to take a look at the 4-hour chart of AUDNZD, in order to see what is taking the bulls so long.
This chart shows the sharp rally from 1.0236 to 1.0763, as well as the following decline to 1.0354 so far. As visible, the former could be seen as a nice five-wave impulse, labeled as wave (1), where wave 1 is the longest, but wave 3 is still longer than wave 5, so there is no violation of any of the Elliott Wave Principle‘s rules. But every impulse is followed by a three-wave correction in the other direction and that is where things start getting complicated for AUDNZD. Between 1.0763 and 1.0362, there is a flat correction, which is deep enough to be the entire wave (2). The market did not think so and after an initial recovery to 1.0657, allowed the bears to take the wheel again. So, it seems that wave (2) is going to be a corrective combination between a regular flat in wave w) and a simple zig-zag in wave y), whose wave “c” is still developing as an ending diagonal.
If this is the correct count, we should expect one last swing low somewhere near 1.0340 in wave “v” of “c” of y) of (2), before the uptrend resumes with wave (3). The good thing is that wave (2) cannot retrace the entire wave (1), which allows us to identify 1.0236 as an invalidation level for this count. As long as AUDNZD trades above this key figure, we remain confident in the bulls’ ability to turn things around.