On Wednesday, after the FOMC interest rate statement Wall Street
equity traders dropped the 1% gains, that had taken 23 hours of futures
trade on the S&P to build, in a 15 minute elevator ride lower.
Traders absorbed the BOE and ECB interest rate releases on Thursday,
neither of which impacted the trading pattern seen earlier, as the U.K.
and European central banks maintained rates at historically low levels.
Overall, the U.S. dollar index is trading around significant support
levels shown, above the 75.00 area, where the dollar was easily bought
from recently. If S&P futures hold below the 1069 resistance zone
that dollar index support becomes rock solid it would seem. The
inverted link between S&P/Usd intra-day trade is in place, and
holding very well.
The global economic outlook still has yet to move from signs of
growth, to monetized expansion, and that transition is very likely to
lead to stair-step/elevator trading as each Asian, European, and U.S.
trading session gets underway. We are seeing fair value being found on
the dollar, and without a long break from the S&P above 1069 that
holds, it is hard see how the dollar index can get under 75.00.
Over the past few days the market registered new highs on Gold,
which interestingly did not push the Aud/Usd pair higher, as we may
have expected. The recent reports from the Reserve Bank of Australia
have highlighted the increased demand for the countries natural
commodities, including iron ore, copper, and gold, which historically
have increased the value of A$.
As such, S&P futures will have to break through the1069 area,
for higher aussie prices it seems. Goodness knows where gold has to
trade at in an effort to move the pair; fair value on Aud/Usd is
obviously in place.
From an Elliott Wave perspective the aussie is consolidating around
the daily trend-line support, which needs to be taken out for a
down-trend continuation. A first target after the break would be the 50
day simple moving average at 0.8800.
Aud/Usd Daily Elliott Wave view
Overall, the Aussie has dropped from the 0.9326 highs, with 400
pips already shaved off recent values that were set after the first of
two 0.25% rate increases from the RBA, the second of which has not
impacted the value of the pair at all.
Not even the second 25 basis point interest rate hike has been able
to draw bids into the aussie, and that confirms the fact that forex
values are linked to risk (equity trade) right now, and not yet
interest rate differentials (global growth).
Aud/Usd 4 Hour chart
As such, our subscribers were able to make some profit on this 400 pip move, after the chart below was sent out on 22nd of October, just a session or two after the 0.9326 top was hit.
Aud/Usd 4 Hour Elliott Wave view (posted on 22nd of October)
