„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.
On the daily chart, we can see no major changes, so let’s go a bit lower. On the H4 TF we can observe that the move down which occurred between the two zones, is a five. It translates into 2 scenarios. Based on the first one, we treat the impulse down as wave 1 down, and the current gains that occurred as a result of rejection of the support – as wave c of an irregular correction (the move up is a 5). Once it is completed, we should see a continuation of declines as part of wave 3. The second scenario considers wave 5 up as a wave of a simple correction, and once it is finished, we should see gains as part of wave c. There is also a third scenario, where the impulse down is wave 5 that ends the entire move down counting from the top dated February, and wave up 5 is wave 1 of a larger reaction.
When looking at the Ichimoku chart, we can see that the pair is struggling with Kijun D1. I consider that line as a reference point, which allows us to choose one of the above scenarios. If the pair breaks above the line and out of the cloud and gets retested, it will be possible to look for an entry to trade wave 3 or, in the case of a simple correction, to trade wave c. However, a decline under Kijun, its retest and break out of the cloud from the bottom, will allow us to trade a downward scenario.
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We can observe a very similar situation on GBP/USD. Wave 5 down formed and the move up following rejection of the support is an impulse. Possible scenarios for this pair are similar to those for EUR/USD. However, the impulse up itself has been finished and currently we are witnessing a simple correction that reached the inner support zone. It is quite possible that it will end in the same place and we will see continuation of gains as part of wave 2c/iii.
On the Ichimoku chart, the pair bounced off the Kijun D1 line twice and reached Kijun H4. We can see two Pin Bars that may suggest the simple correction is over, which will mean an attempt to break out above Kijun D1 and the descending cloud. I will treat a strong break-out and a retest of one of those lines as an opportunity to trade wave 3. Sentiment is neutral, therefore positions in either direction can be opened. However, if the pair breaches Kijun H4, the scenario involving completion of an irregular correction may get the upper hand and I will look for occasions to trade declines.
Translation: Mirosław Wilk