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AUDUSD Shorts Triggered - Objectives are Below Parity

By , Sr. Technical Strategist
10 July 2012 17:43 GMT

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“THE MARKET(S)” a.k.a. “RISK” SNAPSHOT - 60 Minute Closes

AUDUSD_Shorts_Triggered_-_Objectives_are_Below_Parity_body_all.png, AUDUSD Shorts Triggered - Objectives are Below Parity

Prepared by Jamie Saettele, CMT

EURUSD – 60 Minute Bars

AUDUSD_Shorts_Triggered_-_Objectives_are_Below_Parity_body_eurusd.png, AUDUSD Shorts Triggered - Objectives are Below Parity

Prepared by Jamie Saettele, CMT

The EURUSD continues to press lower towards bearish objectives; notably 12150, 12068, 11875, and 11640. The EURUSD didn’t make it back to 12360-12400 but I did mention yesterday to “watch 60 minute RSI – rallies should be capped by roughly 60 on the indicator if the downtrend is still in force.” RSI reached 58.57 this morning before the resumption of weakness. The drop below 12255 satisfies minimum expectations for the wave v decline from 12333 but we can narrow in on additional (potential) objectives by zooming in on the decline from 12692. Common relationships in Elliott include equality between waves v and i and wave v = 61.8% of the length of waves i through iii. These 2 levels are at 12200 and 12063. The latter level is in line with the 12068 objective from the larger degree pattern.

So how does one trade this? First of all, any risk on shorts should be kept to today’s high (12333 + spread of course). Exceeding that level would leave shorts vulnerable to a move back into 12400. 12280-12305 is now short term resistance to short into. Depending on where shorts are taken (12280-12305), risk against 12340 would be anywhere from 35-60 pips. I’ll trade with 3 objectives; 12205, 12155 and 12070.

AUDUSD – 240 Minute Bars

AUDUSD_Shorts_Triggered_-_Objectives_are_Below_Parity_body_audusd.png, AUDUSD Shorts Triggered - Objectives are Below Parity

Prepared by Jamie Saettele, CMT

Shorts were triggered this morning at 10240. The AUDUSD is clear cut; 5 waves down from 10328 and 3 waves up from 10154 set the stage for a sharp 3rd (or c wave) decline. Levels of interest are 10070 (100% extension) and 9970 (161.8% extension and 6/25 low). I favor the more bearish 3rd wave interpretation (first objective 9970) as per my outlook for equities. To be sure, shorting risk in a low volatility environment is difficult to do psychologically but the setup is clean.

The NZDUSD and S&P futures patterns are identical to the AUDUSD pattern. In fact, the 161.8% extension of the 1375-1341 ES decline from this morning’s high at 1356.50 is in line with the 6/25 low at 1302.50. The NZDUSD 100% extension is in line with the late June lows at 7840 and the 161.8% extension is in line with the 6/7 high at 7750.

To contact Jamie e-mail jsaettele@dailyfx.com. Follow me on Twitter @JamieSaettele

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Jamie is the author of Sentiment in the Forex Market.

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10 July 2012 17:43 GMT