AUDUSD was flying above 0.7830 just two weeks ago. On April 21st the pair rose to 0.7834 and everything was looking as if sky was the limit for the bulls. Today, May 4th, AUDUSD plunged to 0.7460 so far. According to the majority of experts, the obvious explanation for the current weakness is the surprising decision the Reserve Bank of Australia took on Tuesday, May 3rd, to cut its cash rate by 25 basis points to 1.75%. It makes sense until you take a look at the charts of AUDUSD, which clearly show that the Australian dollar began declining against the U.S. counterpart on April 21st, not on May 3rd.
So it turns out the market is ahead of the news once again. The Reserve Bank of Australia does not change the trend. It simply follows it. The question is how can you be ahead of the news as well, instead of waiting for someone to surprisingly decide something?
The next chart shows the forecast our premium clients received before the markets opened on Monday, April 25th, 9 days before the cash rate cut by the RBA.(some of the marks have been removed for this article)
The method we use to stay ahead of the news is called the Elliott Wave Principle. On April 25th, it warned us not to “buy the dip”, because the weakness in AUDUSD was supposed to extend much lower. In addition, the relative strength index was showing a strong bearish divergence, which further supported the negative outlook. We shared with our premium clients our opinion that “short positions are preferable as long as the invalidation level at 0.7835 holds, while first targets … around 0.7500 are plausible.” The updated chart of AUDUSD below shows how things went.
Fortunately, 0.7835 was never threatened. Instead, the exchange rate began declining and, on May 3rd, the day the Reserve Bank of Australia announced its surprising decision, the target at 0.7500 has been reached and exceeded.
In order to be successful in the market, traders need an accurate forecasting method. The Elliott Wave principle is the one we use an trust, because it not only tells us what the market is most likely to do, but also provides a specific price levels to serve as a map, which allows us to know it if we are wrong. What more does a trader need?
What to expect from now on? What is the bigger picture saying? Is AUDUSD going to continue even lower or the support near 0.7460 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your on demand Elliott Wave analysis now or pre-order the one due out next Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.