Aug. 27 (Bloomberg) -- The Australian dollar, which fell to a one-month today, may extend losses to $1.017 if it declines below so-called support at $1.0342, according to Skandinaviska Enskilda Banken AB, citing trading patterns.
Australia’s currency closed last week below a previous level of support at $1.041, before briefly rallying today, though not enough to indicate it won’t weaken further, strategists Anders Soderberg and Dag Muller in Stockholm wrote in an e-mail to clients.
“Since Friday’s low point, a three wave upside correction has been completed and the market this morning made a second attempt to extend the break lower,” the strategists wrote in the note, referring to Elliott Wave Theory. “Continued weakness beyond $1.0342 will add a lot of credibility to a bearish case,” or the argument that it will keep weakening, they wrote.
The Australian dollar depreciated 0.1 percent to $1.0392 at 11:23 a.m. in New York, after dropping to $1.0372, the weakest level since July 26. The currency is currently above its 50-day moving average at $1.0342.
If the Aussie breaks below $1.0342 it is likely to weaken toward other levels of support at $1.0281 and $1.017, Soderberg and Muller wrote.
Elliott Wave Theory, created by American accountant and author Ralph Nelson Elliott in the 1930s, seeks to predict moves in financial markets by dividing past trends into five sections, or waves. The theory proposes that a five-wave gain or decline is followed by a three-wave move in the other direction.
Support refers to an area where technical analysts anticipate buy orders to be clustered.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
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