Aussie strength over the last month is simply undeniable. We are approaching 11-year highs at 0.8212, only 20 points above the spot rate. But before we get too carried away in the emotion of the breakout, we need to consider the position of the ADX. Currently, ADX is registering 38.26. The 2 previous readings above 37 all foretold a 300+ point retracement in the following weeks. I am not saying go and short Aussie tonight based on this analysis, rather be on the alert for wave-ending technical targets above us armed with this analysis. And two such targets happen to be just above us. The Dec '96 high is 0.8212, and the 1.0 projection of waves (1)-(3) comes in at 0.8251.

I had a trade plan for tonight to buy Aussie targeting 0.8215, but that just played out before I could publish the strategy. Based on yesterday's analysis, we continue to bid for Sterling.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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