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This is my second blog post in an attempt to give you my brief FX Market Outlook for this year. In my first post I've been talking about my YEN outlook, you can check it here For now we're going to stop and talk about Aussie and what is the market expectation for this year.
After RBA cut its benchmark interest rate to a record low in an attempt to stimulating borrowing thus the overall economy, aussie dollar was on pressure and has kept pressing lower for the most part of the last year. Also RBA has also kept the door open for another round of interest rate cut if the economic sentiment is predominantly negative, so RBA has some room to move if it wants to cut its benchmark interest rate. There where many other structural factor that put pressure on Aussie like:
Even the technical are favoring lower AUD/USD and based on Elliott Wave we are in the stage of wave 3 where the market should start aggressively move to the downside. Although we have completed a 5 wave cycle since we break to the downside from the 1.0580 high (Figure 1) this is just the first wave of higher degree. The reason why we may assume this is the first wave of higher degree is because of the structure of the recent up move, which is an abc formation, corrective in his nature. This abc formation should end the next wave of higher degree, wave II. Figure 1 show exactly how we should count the waves and what to expect to happen next. Now we're in the first stage of wave 3, this only suggest lower price in coming months.
Remember don't fight Central Banks, just look at at the FED and BOJ when they want to get something they more likely will drive the market in their desire direction.
Best Regards,
Daytrader21.
After RBA cut its benchmark interest rate to a record low in an attempt to stimulating borrowing thus the overall economy, aussie dollar was on pressure and has kept pressing lower for the most part of the last year. Also RBA has also kept the door open for another round of interest rate cut if the economic sentiment is predominantly negative, so RBA has some room to move if it wants to cut its benchmark interest rate. There where many other structural factor that put pressure on Aussie like:
- IMF which suggested the Aussie dollar is 10% overvalued and recommended RBA to maintain easy policy settings.
- With US Fed beginning to taper AUD/USD is at risk to go lower as well.
- Figure 1. AUD/USD daily chart.
Even the technical are favoring lower AUD/USD and based on Elliott Wave we are in the stage of wave 3 where the market should start aggressively move to the downside. Although we have completed a 5 wave cycle since we break to the downside from the 1.0580 high (Figure 1) this is just the first wave of higher degree. The reason why we may assume this is the first wave of higher degree is because of the structure of the recent up move, which is an abc formation, corrective in his nature. This abc formation should end the next wave of higher degree, wave II. Figure 1 show exactly how we should count the waves and what to expect to happen next. Now we're in the first stage of wave 3, this only suggest lower price in coming months.
Remember don't fight Central Banks, just look at at the FED and BOJ when they want to get something they more likely will drive the market in their desire direction.
Best Regards,
Daytrader21.
