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AUDUSD Looking for Support near 0.7160

AUDUSD climbed to 0.8136 in January, but similarly to other major currencies, spent the rest of 2018 declining against the U.S. dollar. The pair fell to 0.7021 on October 26th, but recovered to 0.7338 on November 16th. As of this writing, the Aussie trades at 0.7267 versus the greenback. Should we expect the downtrend to resume or the recovery to continue? Let’s examine the structure of the recent rally from an Elliott Wave perspective on the hourly chart of AUDUSD.
AUDUSD Elliott Wave forecast
A quick look at AUDUSD’s path from 0.7021 to 0.7338 reveals a five-wave impulse pattern, labeled (1)-(2)-(3)-(4)-(5). The five sub-waves of waves (3) and (5) are also clearly visible. According to the theory, a three-wave correction follows every impulse. This means the decline from 0.7338 to 0.7203 is probably wave (a) of a simple (a)-(b)-(c) zigzag, whose wave (b) up is now unfolding.

If this count is correct, wave (c) down can be expected to drag the pair to the support of wave (4) near 0.7160 and complete the 5-3 wave cycle. The combination between an impulse and a correction means the market’s next move is likely to be in the direction of the impulsive sequence. Once the pair drops to 0.7160, a bullish reversal should send AUDUSD towards 0.7400.

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