ForexPros Daily Analysis July 18, 2011
Commodity Currencies Will Be Bought Once S&P Consolidation Completes
The markets are consolidation as Japan was closed for holidays. But looking from a little bit larger perspective we may see dollar shorts soon, especially if commodities will remain bullish. The main reason for lower dollar is also a stock market, where S&P500 shows corrective price action on a daily. We are monitoring a triangle consolidation, and once this will complete, majors will rally. At the moment, wave E) of (4) still not done, as shown on the attached chart below.
Once the stocks will find buyers, commodity currencies such as Australian and Canadian dollar will find the support.
Aud/Usd bounced sharply higher at the end of June from 1.0389, where corrective wave (4) appears complete. Well, first impulsive leg found highs just below 1.0800 region, which was wave 1/A as labelled on the chart. As such, current price action must be corrective, with wave (c) underway that may test 1.05 once again, before uptrend resumes. We can also see a blue trend line in that area, that will also tend to react as a support.
After a sharp reversal from above 0.99, Usd/Cad made a nice corrective a-b-c pull-back within wave 2) that found the top at the trend line connected from 2011 lows. From there we can see an impulsive qualities, and if our count is correct, then pair should hit much lower levels in days ahead, as wave 3) appears to be underway with minimum targets seen at 0.94.
Forex Trading analysis written by Gregor Horvat for Forexpros.
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