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„Searching, Analysing, Trading” is a series of analyses designed for an investment strategy based on Price Action and Elliott Waves. Its step-by-step description can be found in this link. We kindly invite you to follow our today’s review of selected currency pairs and potential opportunities for transactions.

Our analyses are prepared based on Ducascopy’s SWFX Sentiment Index, available here.

EUR/USD

The pair has reacted ideally to the support and the inner line drawn on the peaks of the last upward-moving consolidation. A Pin Bar developed and some kind of reaction may be expected and a retest of the recently breached zone. Such a move could be the beginning of wave 4 of the whole impulse down that is being formed starting from the top. Looking at wave 2, which is a simple abc correction (zig-zag), this wave should be extended in time and be a complex correction. If the zone defended yesterday is breached, the scenario involving the formation of wave 4 will be negated. 

As can be seen on the H4 Ichimoku chart, the pair has reached the Kijun line and only once it has been breached, can we consider a scenario with a larger correction as part of wave 4. If the pair succeeds in breaking Kijun, another target for possible rises should be the Tenkan line from the daily chart (bolder red line). Such a retest of the Tenkan line will create a good opportunity to look for positions to trade wave 5.

GBP/USD

The pair, having broken out of a consolidation being an expanding triangle and wave 4 of the whole move down, breached the lower limit of the support zone. An Inside Bar was formed, from which the pair broke yesterday from the bottom. If we marked the possible sequence correctly, the pair should continue falling towards the 1.3300 level. However, before that happens, the lower limit of the IB may be retested, creating an opportunity to join a down trend.

On the H4 Ichimoku chart, we can see that the pair, having completed the formation of an expanding triangle, tested the Tenkan line from the daily chart (bolder red line). That line was rejected, as the Senkou Span A of the downward-moving cloud. The pair provided us with two signals for trading. One of them was a bounce of the cloud and the three lines. Another approach towards Kijun will give an opportunity for another trade. However, it should be borne in mind that wave 1 and 3 were very dynamic and wave 5 may be delayed in time and full of choppy corrections, which may result in being stopped out of positions.

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USD/JPY

The pair reached an important resistance zone and a line drawn on the peaks. So far those levels have been rejected. A tiny Pin Bar was formed, which may suggest a correction. It should be wave 4 of the last wave up and should not go lower than the recently breached support zone. This correction may be used to trade wave 5. Although there is little space for that, yet considering that wave 1 and 3, looking from the bottom up, were of similar length, this one may be extended and what is taking place now is may be only the beginning of wave 5.

On the H4 Ichimoku chart, we can see that the pair is testing the Tenkan line and once it is breached, a correction towards Kijun and possibly Tenkan from the daily chart should be enabled. I particularly count on a retest of the latter. If the price approaches and rejects it, a good signal for trading wave 5 will be created and additionally, it will be sufficiently far away from the top that a possible position could be changed to break even, which, in the case of a broken wave, will protect us from a loss.

Translation: Mirosław Wilk

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