AUDUSD seems to have carved a meaningful top around 0.7400 handle early this month. Further, the subsequent drop below 0.7200 mark also suggests bears should remain in control until prices stay below 0.7400 levels. Once the pullback rally is over, bears are expected to resume lower.
AUDUSD probable wave counts are as follows: The currency has earlier dropped through 0.5510 lows (not seen here). Since then it has managed to care a series of higher highs and higher lows all through 0.7400 handle. The rally has clearly unfolded into 5 waves, making an impulse.
If the above proposed wave structure holds well, AUDUSD should ideally prepare for a 3 wave corrective drop at a similar degree. Bears might be looking to drop towards 0.6700 mark initially, which is the fibonacci 0.382 retracement of the entire rally.
Looking further into the lower degree wave counts, the drop between 0.7400 through 0.7200 seems to be an impulse, which could be marked as a lower degree Wave 1. The subsequent rally has managed to reach 0.7359 high until yesterday, before reversing lower again.
Also note that the corrective rally has tested fibonacci 0.618 retracement of the above drop, Wave 1 here. Probabilities remain high for a continued bearish reversal from here until prices stay below 0.7400 handle, going further.
Traders might have initiated fresh short positions around 0.7330/50 zone, with a protective stop above 0.7400 mark and a projected target below 0.7100 over the near term. Only a break above 0.7400 mark would change the bearish structure.
Technical Analysis Team
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