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AUDUSD: A Bearish Omen Half a Century in the Making

AUDUSD climbed to 1.1079 in July 2011 and has been steadily declining ever since. In mid-January 2016, the pair fell to as low as 0.6826 and as of this writing it is still in the doldrums, hovering around 0.7560. After a 38% crash in less than five years, one might think it is time for the Australian dollar to start recovering against the U.S. counterpart. We thought so too, until we came across fxtop.com‘s historical chart of AUDUSD below, which allowed us to see the entire wave structure since the official collapse of the Bretton Woods system in 1973.
audusd historical elliott wave analysis
In 1973, AUDUSD started plunging from 1.4885. It took the bears almost 30 years to drag the exchange rate down to 0.4776 by April 2001. As visible, this epic selloff took the shape of a five-wave impulse, labeled (I)-(II)-(III)-(IV)-(V) with an extended wave (III) and an ending diagonal in wave (V). The three-wave recovery to 1.1079 lasted another decade. It is interesting to note that the bulls gave up almost “immediately” after touching the 61.8% Fibonacci level. It looks like the post-2011 weakness is the result of a perfect 5-3 wave pattern, which has been under construction for almost forty years. Unfortunately for the bulls, this also means AUDUSD is not done plunging, because according to the Elliott Wave Principle, targets below the 2001 bottom at 0.4776 are plausible. This is a very long-term analysis, which does not exclude the possibility for significant recoveries along the way. Sill, it pays to keep it in mind.



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