In our previous technical analysis of the AUDUSD pair, we mentioned the potential corrective formation that was developing. In particular, we warned about the progress of an incomplete fourth wave of Minute degree identified in black, in which the pair was advancing on the wave (b) of Minutette degree in blue.
Technical Overview
As the previous chart shows, the price action seems moving in a mid-term sideways channel. This formation has been evolving since early September, when the price topped at 0.74134. In terms of the Elliott Wave theory, the figure shows the progression of a likely incomplete flat pattern (3-3-5).
In this context, the bearish rejection below September’s high of 0.74134 should confirm the end of wave (b), in blue, and the beginning of wave (c). Also, according to Elliott’s textbook, the coming wave (c) should follow an internal sequence subdivided into five waves.
The big picture of the AUDUSD pair currently reveals the gray box’s rejection suggested in our previous analysis. From here, the Aussie could start to decline in a five-wave sequence corresponding to the already mentioned wave (c) of Minuette degree, labeled in blue.
Short-term Technical Outlook
The AUDUSD price exposed in the next 2-hour chart reveals the completion of wave c of Subminuette degree identified in green, which topped at 0.74076 on November 30th, as the price action developed an ending diagonal pattern.
Considering that the pair started to consolidate, we expect an intraday sideways formation, likely a flag pattern. In this context, if the price breaks and closes below the baseline of this flag pattern, the AUDUSD could confirm the bearish continuation, which could make it drop to the next demand zone between 0.72654 and 0.72801.
Likewise, the price could extend its declines toward the next demand zone between 0.71449 and 0.71651. The movement, developed into a five-wave sequence, should complete the wave (c) of Minuette degree identified in blue, which, at the same time, could confirm the end of wave ((iv)) of Minute degree labeled in black, as we said earlier.
The invalidation level corresponding to this downward scenario is placed at the high of wave c, in green, 0.74076.