AUD/USD: Possibly in terminal wave of cyclical weakness – SocGen

Stéphanie Aymes, Research Analyst at Societe Generale, suggests that the phase of weakness in AUD/USD since 2011 does not appear to have much steam left as it could be in the process of completing a cycle low.

Key Quotes

“Of note is that it has almost completed the typical 4-5 year correction which resembles that of the late 1990s.

Earlier this year, the pair achieved a key support near 0.6750/0.65, a projection for the down move and highs of 1999. Since then it has appeared to evolve within a stabilization stage highlighted by a double bottom formation. This also resembles the base formations in 2001 and 2008-2009 which led the way to sustainable recoveries. The monthly indicator is also testing a key graphical floor (as in 2000 and 2008) which confirms proximity to a significant trough.

Thus 0.6750/0.65 should be limiting levels for the downtrend in AUD/USD. Holding these levels, a gradual recovery can be expected and the pair is likely to head towards 0.7830 and perhaps even towards the multiyear channel at 0.8160.This will be confirmed if a larger uptrend takes shape.”