AUDUSD to 84.00 – First Stop
About two weeks ago my wife told me that her girlfriend — who married a Kiwi and now lives in Brisbane – told her that her and her husband (I call him The Saint which would make sense to you 10-minutes after you met his wife) were going to retire and live on thier real estate income. Now I know enough to know The Saint didn’t say that, and it was one of those things a mildly ignorant, competitive, American living abroad might say to a person who works for a living in an attempt to feel superior. But the very mention of such an idea brings up the possibility that Brisbane real estate, and much to do with Australia, maybe a tad inflated…
Our business has it’s share of old timers with cluttered charts who know a thing about Elliot Waves, but if you go back beyond even them, there’s the guys that take it to the next extreme: followers of W.D. Gann. If you ever want to get w/ a group of die hard demo traders who know a heckova’ lot under the stars and sun and have the messiest charts you’ll ever see to prove it, find the Gann guys. Yeah…these guys are committed! In every Wall Street trading shop there’s an old Gann guy that can prove the connection between astrology and the price of oats.
The one thing I take away from my experience with these devoted followers of W.D. Gann with their dirty fingernails and wildy dissheveled charts is the master’s — Gann’s — theory that market’s move in 1/8ths.
The chart in Figure 1 is a weekly graph of AUDUSD with Gann’s lines taken from the ‘08 high and low. If you read Gann’s works you know that one of the best trades you can take from a risk reward stand point is to sell at 7/8ths or buy at 1/8th. Don’ t know why that is, but my old friend T. Henning Murrey, aka Murrey Math, can attest.
Figure 1
Regardless of what I think about what The Saint’s wife said, or the Ganners pickin’ a top for old times sake, I can tell with some assurance that the daily and weekly trends are down for AUDUSD and the Monthly is sideways at best. If we see a blip back up into the 89 handle it may be the last time we see that level for awhile. I’d tend to agree w/ the bears here that 84.00 — or what Ganners call the top of the pipe, 5/8ths – is likely the next stop on the way down…
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009, and a trading instructor at Trading-U.com.
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