Good afternoon team,
As you know this week we are expecting increased volatility due to the large number of economic risk events taking place. The AUD has remained one of the top performers despite some risk-off moves in the market. The AUDNZD is tracking very well and we will continue to let it play out over the next couple of days.
Although we are expecting volatility leading into the FED interest rate decision and statement, technically speaking the DXY appears to have one more leg to complete to the downside before a continuation in the bullish trend.
DXY – 4 Hour Chart
An Elliot wave triangle can only occur in wave 4 or wave b. And based on the current wave structure, it appears to be a wave B formation, which indicates another leg to the downside is yet to come. If the DXY creates a high above the C wave top the bearish setup becomes invalid, so we have a nice risk v reward scenario here. The bearish invalidation level is 96.60. I understand the FED are expected to announce an increase in the speed of its bond tapering, however, due to the risk v reward scenario on the DXY, I feel this is worth a trade.
AUDUSD – Daily Chart
Technically speaking, the AUDUSD has broken two key negative trend line resistance and the MACD has crossed over to the upside. The AUDUSD is now retesting the broken trend line which is acting as support.
AUDUSD – 1 Hour Chart
The recent correction appears to be in 3 waves, labelled a,b,c. Technically speaking the corrective decline should now be complete and a move to the upside should occur leading into the FED decision. This is in line with the bearish setup on the DXY and the bullish technical breakout on the GBPUSD.
Trade Setup: BUY market execution, current price 0.7113, stop loss 0.7030 and take profit targets 0.7230-0.7300.
Stop loss: 83 pips
Take profit: 117-187 pips
If you are looking to take less risk on this position you can use the 0.7160 level as an entry point into the market and the most recent low of 0.7080 as the stop loss value.
Keep in mind, if the DXY breaks the C wave top we will look to close down this position early.