AUDUSD closed out the year with a bang, reaching a high of 1.0257 Friday, a price not seen since July 1982. The pair has a slight tendency to drop during January (17 down Januarys out of 29 since 1982).
1.0307 is the top upward line drawn on the weekly chart below. There was an inverted head and shoulder pattern on the daily chart (not shown) that I blogged about in November. Its target is 1.0371. Above that is a psychological 1.0500 resistance level. I also have a 1.0640 target from one of my Point and Figure charts. That will remain valid unless the pair closes below .9570. The pair has been in an overall uptrend since 2001 even if you take into account the severe correction in 2008.
Taking the opposite point of view, in looking at the weekly chart, one could make a case that this is an expanded flat unfolding with this being the B wave. All this is Elliott Wave speak, a "theory" with which I am not completely enamored. Expanded flats typically are 138% longer than wave A. This is much more than that but it can't be ruled out until price exceeds 1.0608 (161.8% the length of A). To be an expanded flat, wave C needs to end beyond Wave A. Wave C could end higher than wave A's 6007, in which case the entire mess would be called a running flat.
Another way to look at the weekly chart is from the perspective of this being a CD leg of an AB-CD move of some sort. If so, expect some consolidation, possibly a small push higher (into the 1.0307/71 zone) and then a reaction downwards. Under this scenario (which I'm currently leaning towards), one would short at those prices. However, there is support at 1.0183 and .9982 (.382 of the move from .9537 to 1.0257). If one started to see buy signals there, it would be best to close the position and reverse. The picture should become clearer in the next day or so.
Here's the weekly chart:
© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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