„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

Yesterday EUR/USD reached a lower boundary of a key support zone, which at the same time, is a lower limit of a consolidation that has been playing out already for over 2 months. There are still three possible scenarios. According to the first one, the current decline is wave e within a triangle being itself wave 4 of the last wave up. Based on the second scenario, the last wave down is wave c within wave C of a simple correction. In both cases, a strong upward move should be triggered from the current levels or slightly lower. The third scenario assumes that the zone is breached, giving rise to a third wave down that will test the peak from September last year (1.2040).

We’ve observed no changes on the Ichimoku chart. Yesterday we saw a retest of the Senkou Span B line and continued moves down. All lines are pointing downwards. The Chikou line reached its maximum distance from the price and is facing the last obstacle in the form of Senkou Span B. The Kljun and Tenekan lines are quite far away from the price, which may prompt a move in their direction. Sentiment reading points to a defence of the support. Long positions are still on the rise. If a stronger upwards move occurs on EURUSD, we could take advantage of its correction to carry on long in anticipation of further gains.

GBP/USD

On the GBP/USD front, the downward scenario is still prevailing. The impulse triggered off at the peak is strong enough to continue some declines, which obviously does not equate with a trend change. Such a scenario may be considered only once a stronger 3rd wave develops and the price falls below the 1.3600 level. I treat the current fall as wave 1A and am waiting for its correction. It is the formation of wave 3C and its nature that will give a clear picture.  A strong move up cutting through the resistance around the trend line will negate this scenario.

On the Ichimoku chart, the pair reached a thin upward cloud with a slight reaction on the demand side. The Tekan and Kijun lines remain stuck together and the subsequent wave down should cut through them and prompt a weak signal downward. The Chikou line keeps struggling with the cluster formed by Tenkan, Kijun, the price and Senkou Span A, which may lead to a correction of the last wave down. The price hovers under the Kijun Line, which makes me look for shorting opportunities, but the sentiment that still shows increasing long positions, is holding me back. A possible correction may change the existing situation and an opportunity to trade wave 3 will arise.

USD/JPY

USD/JPY continues moving up, boosted by a breach above the key resistance level. It seems that wave 3 is developing to target at least the nearest resistance level around the 110.300 region. A possible correction as part of wave 4 should not go below the zone that has been recently breached, now acting as support.

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On the Ichimoku chart, the pair breached the Senkou Span B line yesterday and reached above the declining cloud. Its retest will create occasions to look for a long position. The Chikou line penetrated the cloud, breaching Senkou Span A, still facing to tackle Senkou Span B. The remaining lines confirm a strong upward move. Obviously, the sentiment reading totally excludes the possibility of opening positions in line with the momentum (an inherent feature of that pair). The entire advance is used to average out positions, hence a sharp increase in shorts. Patient observation is the only solution for the time being.

Translation: Mirosław Wilk

 

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