Extended Fifth Wave in NZDUSDMy recent medium-term update on the NZDUSD has evoked some interesting discussion (see comments section for that post). This is a follow-up post, and should serve to answer some of those questions. First of all, I would like readers to understand that my approach to the financial markets differs from many of the other practicioners of Elliott Wave analysis in one significant way. I use the Elliott Wave principle to help me with my trades (or those of my clients). The goal is not to be accurate about the labels, or even the extent of a potential move. The value offered by my approach is it tends to get the direction right on most of the calls, and the entry levels suggested (when I recommend a level) often makes for a low-risk trade. This approach allows me the flexibility to change my counts as the market unfolds, and we all know that the markets are under no complusion to follow what we wish it to do! It will do what it pleases, and when it deviates from the anticipated path, we will make adjustments at our end!

The recent call for NZDUSD to go towards 0.6800 is like looking at a map of the world and saying if you wish to go to Antartica, you should head South. Promptly after I wrote that piece, the NZD headed North, and reached a high of 0.8016. But no harm was done, because that post was not a trading recommendation. But looking at the shorter term (hourly charts) this morning, I am able to see the completion of an extended fifth wave from the low of 0.7451. I wish I had seen this last Thursday, because it would have been fairly easy to spot the end of the fifth wave.This is shown in the attached chart, and it follows one of the techniques I have described in detail in my book “Five Waves to Financial Freedom”

Yet, it is not too late because the downside targets for the correction that follows the completition of the extended fifth wave is not only predictable, but in the case of the NZDUSD still lies some distance away. I am inclined to think that we are in the process of completing the first leg of a complex correction down from 0.7990. If that plays out well, we will get a recovery as an X wave to the mid 0.79s. There exists a slight chance that we revisit the prior top (0.8010/15 area!). Irrespective of which way the next move unfolds, we will get a swift sell off later on to around 0.7715. Now that is valuable information. If you get lucky to see the Kiwi around 0.8000 levels, you should take the trade with an affordable stop. (note, this will work even if we get a slight throw over above 0.8016). But as of now, I think the odds favor the development of a corrective X wave to 0.7930/50 followed by a steep decline to 0.7715.
Good luck.