AUD/USD Short op coming soon

A/U is in the midst of a corrective rally. How far the rally goes is the million dollar question. One good possibility is the Weekly Trendline. What also intersects at this same price point (1.0600ish) is…..38% of wave II based on a line chart; 50% retrace of the recent down move, wave (I); and a 2.0* possible wave A up! And (not shown) are my favorite moving averages converging on the 4hr chart. That’s a lot to converge on one point and is the favored target to shoot for. The second point of entry is just a break below a trendline connecting the soon to be revealed low-to-low points.

The lower targets have not changed, however, a triangle is starting to emerge as a possibility on the 4hr chart and needs to be watched for support. There is a large potential for an upside breakout that won’t be negated until a drop below $1.0440. Two glaring problems to the downside call are the S&P500 chart and the USD. The S&P500 still has not hit my 1390±6point target and the Dixie has left behind a small gap at the 75.79 to 75.81 zone.(EDIT 05/24 10:00, ACK! Corrected 79 to 75)

S&P500 first. It’s now fallen back to the location that was suggested for the pullback to end, the rising channel line. The index has bounced marginally off that line. In fact, that is a key area to watch, any drop in the S&P below that area and the A/U trade will be good to go but, a continued rally in the S&P and the A/U trade will be busted.

The USD: Dixie may be marching North once again. The breakdown from “1” was met with a shallow retrace which is usually indicative of a very strong market and gives credence to the thought that the gap is indeed a breakaway gap and won’t be filled for some time to come. The latest chart showing the launch and gap point is here (EDIT 05/24 08:00: Corrected 79 to 75 on chart image)

Here is the 30-min A/U chart:(click to “embiggin”)

This one is tough to call in advance as it could retrace all the way to the initial breakdown point of $1.0633ish. The other risky aspect is that there is no safe stop until all the way up at $1.0711….and that’s a long way up. Oh what to do? The way I want to play this is short at $1.0590 with a 50pip stop but the S&P has me holding off for better confirmation. I think there is about 24hours or so for this retrace to shape up a little better. Holding off will allow the retrace to pattern up and give a better idea of what’s going on. I would rather make a safer entry. But at least now you know what I’m looking at doing.

EUR/USD is in a beautiful corrective uptrend…..maybe that should be the play?

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