AUDUSD Carves A Meaningful Top At 0.7060

09 July 2020

AUDUSD is looking to reverse lower from current levels (0.6983) towards 0.6530 in the coming weeks. Bears are poised to take control back and a break below 0.6840 would confirm. Immediate resistance is at 0.7065 and price should stay below that to keep the bearish structure intact.

Let us have a look at potential wave counts since 0.7065 highs. The drop from 0.7065 through 0.6775 was clearly sub divided into 5 waves, making it an impulse drop. This has been labelled as potential Wave 1 or A on the chart here.

An impulse wave is usually followed by a corrective wave, against the trend. The rally from 0.6775 through 0.6997 has been corrective (flat) and labelled as a-b-c, Wave 2 or B. If the above wave counts are correct, AUDUSD should hold below 0.7000 handle.

Going further, please note that Wave 2 has remained just shy of fibonacci 0.786 retracement of Wave 1, seen around 0.7001 mark. If AUDUSD manages to push through 0.7001, it would still be considered as potential Wave 2 termination.

Bottom line remains that AUDUSD must stay below 0.7065 resistance to keep the above structure intact. Please note that a break below 0.6900 interim support would be encouraging to bears, going further.

Looking at the larger degree wave counts (not seen on chart). AUDUSD had bottomed out at 0.5509 levels in March 2020. Since then, it has remained in control of bulls as they managed to carve a series of higher highs and higher lows through 0.7965 recently.

The entire rally was an impulse wave. The currency is expected to produce a counter trend, corrective drop A-B-C towards 0.6500 levels at least, going forward.

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