At the start of the year I like to scan through some of the higher degree charts to check the main trend, and to get an idea where markets can be headed in 2023.

In this article I will mainly focus on China stocks vs AUD,  since I think it can do very well in 2023 vs the USD.

One of the main reasons of course is a potential CB divergences as we know that FED may start slowing down the hiking cycle. If that’s really going the to be the case then yields on the 10 year notes can stay sideways for a while, or even move south for a deeper retracement which can pull down the buck as well. This we know can then have a positive impact on AUD as investors look for other, better options. Even stocks can do well in such case, of course, if economic indicators wont fall into a contraction.

I think that global economy will depend on China a lot. China is trying to go back to  normal economic activity, despite covid issues. We been reading this for the last few weeks, and investors seem optimistic as well since China and HSI recovered very nice over the last few weeks. Both of them have an impulsive recovery from the most recent low, and looks like there will be more upside coming after a pullback. China 50 is breaking the trendline.

My colleague, Ryan also makes some interesting points regarding the geopolitcal outlook involving China in his post about what will be the trading themes for 2023.

china a50
hang seng

On the chart below we can see a tight correlation between AUDUSD-CHINA50-HSI. If stocks in China are headed higher, then I think AUDUSD will do well. From an Elliott Wave perspective AUDUSD made nice B wave in 2022 that can be bottoming at 61.8% Fib, so there can be an opportunity to catch upward swing into wave C.

Keep up to date with all our latest Elliot Wave analysis on our dedicated technical analysis page.

Trade well,

Grega

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