One of the key advantages of Elliott Wave analysis is its ability to identify high-probability reversal zones before the market actually turns. A recent AUDUSD setup provided a textbook example of that process in action.
In our initial analysis, we highlighted that the recovery from the 0.7080 area appeared corrective and was likely unfolding as wave B within a larger A-B-C bearish correction. Rather than chasing the rebound higher, we focused on a clearly defined resistance zone between 0.7180 and 0.7200, where several technical factors aligned. This area included Fibonacci retracement levels, previous swing highs, and the projected completion zone for wave B.
As price approached the resistance yellow box, our clients were informed upfront about it and Elliott Wave structure suggested that the recovery was nearing completion. The rally lacked the characteristics of a new impulsive uptrend and instead continued to drop impulsively, started developing as a three-wave corrective move. Based on that view, we warned that a reversal lower could emerge from the highlighted resistance region.
The market responded almost exactly as anticipated. AUDUSD stalled within the projected zone, rejected resistance, and quickly turned lower. The subsequent decline broke beneath near-term support levels and confirmed that wave B had likely completed, opening the door for a larger wave C decline.
As the second chart shows, the bearish scenario continued to unfold. Price accelerated lower, breaking below the rising trendline support and moving toward our projected downside targets near the 0.7000 area and below. The selloff validated the original Elliott Wave count and rewarded our short position
All trading notes are shared as they are placed in our intraday page
As we head into second week of June – this is our latest update on AUDUSD pair:
As expected, Aussie is coming very nicely to the downside after it stopped with a three wave rally at the 0.7180 to 0.7200 area, right inside our yellow reversal box that we discussed in previous updates. So far, we can see that wave C is in full progress and will most likely target the 0.7000 level, which is also the spike low from April 12.
That area is also where wave C would equal wave A, right near the lower trend line support of the current downward channel. However, if this channel is broken significantly, then the whole decline from 0.7200 could actually be wave three rather than wave C. For the bullish case, we would of course need to see a reversal back above 0.7150, with price recovering back above the downward channel.
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