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Outlook: Australian Dollar (AUD/USD)

Second retest of channel resistance ending

January 14, 2006

Chart of outlook for AUD/USD as at 14 Jan 2006

The drop back through the channel support in October created the potential for the return to channel support around 0.6950. That decline is stalling but essentially still on the downward path. The current rally should peak shortly and by early
April the Aussie should be testing channel support at 0.7000.

The chart does not show the volatility that has been seen since the breaking of the July low of 0.7368 in November. The action since that low should be considered an irregular correction with the 0.7580 high in mid-December being the first swing, the new low at 0.7235 being the corrective swing and the current rally the final swing. It should peak a few points above 0.7580 to complete the pattern. With the Aussie already having reached 0.7565, the peak could be seen within the week.

The main time vibration is due to rollover at the start of April, so the decline should be making its low at that time. Further declines to the 2004 low should not be discounted.

Only a rise through 0.7765, the last swing high in the decline from 0.7790, will confirm that the downward potential has passed.

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